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Program Files is the name of the directory or the standard folder in Windows where third-party applications are installed by default. An application installed in this folder has its own subfolder where all of its program data go. In 64-bit versions of Windows, there are two Program Files directories, one for 64-bit programs, which is the default "Program Files," and one for 32-bit programs named "Program Files (x86)."
Program Files is a folder or directory where all third-party applications are installed by default, but during installation the installer for most applications gives users an option to select or create their own path for the application's install directory. This means that the Program Files directory is merely a fixture for orderliness and convenience rather than for necessity.
An application or program can usually function no matter where its install directory is, but there are a few exceptions. Some programs need to be installed in the Program Files directory, usually because they contain some hard-coded paths, because of the requirements of some environment variables or because of some other unknown factors; however, these programs typically do not allow a user to install them anywhere else, and hence do not present that option during install. There are also other programs that require a specific folder for installation. The installer for a device driver, for example, does not present the user with the option to select an install location, most of the time just asking permission to be installed or not and then it installs and finishes.