This article is from the CD-Recordable FAQ, by Andy McFadden (email@example.com) with numerous contributions by others.
The ISO-9660 standard allows discs with directories nested 8 deep. If
you try to go deeper than that, you may have trouble reading the files.
Win2K and WinNT4 seem to work, but Win98SE doesn't.
Programs like "mkisofs" can use the Rock Ridge extensions to work around
the problem. Directories are "re-rooted" at a higher level, and invisible
links are created from the deeper directories. Unfortunately, Windows
still doesn't support Rock Ridge.
The UDF format, used by packet writing applications, may (?) allow
deeper directories. However, not all systems can read UDF discs.