Rhythmbox is a music player that allows easy browsing and searching of your music. Audio files (.ogg, .mp3 etc.) have a feature called tags. Tags are small pieces of text that describe the audio file they are in. Examples of tag types are: 'album', 'artist' and 'genre'.
When you import files into your library, Rhythmbox extracts these tags, as well as the location of the file, into its database. It then uses the database to provide the interface that you can use to browse, search and play music. It also allows you to edit the tags in files. Tags replace the semantics of the underlying file hierarchy.
Your default music location is there for when you rip CDs. CDs don't contain tag information so Rhythmbox looks them up online and then uses your preferences to create the music files on your disk with your preferred naming scheme.
If you don't like the way Rhythmbox works, you can install other music players from Ubuntu Software Centre:
As you can see, there is plenty of choice.