You can create folders, for instance "Vacations" and then put your albums within those folders. Maybe an album for "Summer 2005" and one for "Fall 2006" or whatever. You can drag those folders up or down to any location on the sidebar that you want (alphabetically, etc.).
Just make sure that whatever you do, you do from within the app itself, NOT the library in finder. You will corrupt, lose and otherwise create havoc with your photos.