The Project Directory lists the directory in which the saved project file will be stored. This is also where the built source code will be written. Use the Browse button to identify a directory using a File Selection Dialog (which allows you to also create directories if you wish). As you change the Project Directory the Project Name, Program Name, and Project File values will also change, unless you have already changed these other fields separately to give them a different name.
When you save or build a project the directories will be silently created as needed.
The Project Name is the name of your project. This will be used as the title of the main application window you create (the Gnome Application Window). The name can have spaces and other characters. As you change the name of the project the Program Name, and Project File fields also change to reflect your project name (with spaces and other non-alphanumeric characters converted to dashes).
The Program Name is the name by which the final executable program will be known. This is used by Glade to name the output executable file in the Makefile it generates. Once again, as you change this field the following field (Project File) automatically changes to be the same. The previous fields do not change.
The Project File is then the file located in the Project Directory in which the interface is saved. This file has the extension .glade and is a gzip'ed XML document that records all of the project information. See Section 36.3.7 for details.