Itunes creating playlists when adding to Library

Hi all,
just bought the Novation Twitch and mightily impressed. Integration with Itunes is equally fantastic so i decided to visit a long neglected app and add all new music to Library. I am getting very strange results though.

Every folder i add is creating a playlist (never seen this behaviour before in Itunes). I must admit i'm no expert with regards to Itunes but i've looked through all of the preferences setting and can't see anything obvious.

I'm running a MBP and Lion.

Please help someone.


On a side note anyone tried Amarra and is there really any audible difference?