In SharePoint 2007, this folder exist at the root of a site collection only and is used to store all InfoPath published forms.  If it was deleted, and it can be by anyone with owner rights to that site, it will cause all kinds of problems publishing InfoPath forms for the entire site collection.  You can publish, but your forms cannot be web-enabled.  For example, if the library has been deleted, you will see the following error when attempting to publish even the most basic InfoPath form:

“The form template is browser-compatible, but it cannot be browser-enabled on the selected site”.

Clicking the error message reveals additional data that will send you down a different rabbit hole, implying that Form Services are not installed or activated.

The first thing you should check is to see if a Form Template library exists at the root site of the site collection.  Click on “View all site content”.

With no Forms library at this level, SharePoint does not have the storage location it needs to hold a browser-based form.  The fix is relatively simple and requires SharePoint Designer 2007.

1. Open the site in SharePoint Designer
2. In the folder list, select the root node and click File | New to bring up the New dialog.
3. Select the SharePoint content tab, then Document Libraries.
4. The name for the library is important, and needs to be called “FormServerTemplates” (without the quotes).
5. Click OK
6. Right click on the newly created “FormServerTemplates” library and select properties.  Uncheck the box on the Settings tab to “Use a template for new documents”, if this is checked.

This will correct the issue and you will be able to publish a browser-enabled form in InfoPath:

Its also a good idea to go into the site collection and remove the newly created forms library from the Quick Launch, so folks don’t get any ideas for doing things they shouldn’t.

Obviously, if you are receiving the above error messages and the “Form Templates” library DOES exist, there may be issues with your server configuration or InfoPath deployment that you should follow up on.

Note: Don’t ask me why SharePoint installs the form library “Form Templates”, but the fix requires you to name the new folder “FormServerTemplates”.  It just does.