The naming has always been weird.
In the old XI world (XIr1 through BI4.2), “User Folders”, “Personal Folders”, and “Favorites” all meant the same thing – a place where each user could store their own reports.
As of BI4.3, the name is just “Personal Folders”, but has the same function as before.
“Favorites” is a new feature in BI4.3, and functions more like what “Favorites” are in other applications – reports that you have tagged as a favorite and want to access quickly. If you tag a report as a favorite, it won’t appear in your Personal Folder, but it will appear in the “Favorites” list in the Launch Pad home page.