The project folder contains its own Makefile and
nbproject/Makefiles. MPLAB X IDE will run the makefile in the
project folder, then change to the working folder (directory) and run the “Build
command” or “Debug build command.” In effect, GNU Make is run and then whatever is
specified as a build command is run.
The project folder may be located anywhere, with relation to the working folder, if absolute paths are used to define locations. However, this will make your project less portable. Make the working folder relative to the project folder (e.g., one level below the project folder) for your project to be more portable.