Apple accidentally slipped a bug in iOS 7 that allowed iOS users to create nested folders (i.e. folders within folders) on their devices. The bug was not exactly harmful, so Apple did not fix it in iOS 8 (and iOS 8.1) as well.
While a method to create nested folders already exists in iOS 8, YouTuber videosdebarraquito has found another way to create nested folders, which is comparatively easier than the older method. The new method does, however, requires users to enable the ‘Reduce Motion’ feature on their iPhone.
As shown in the video above, iPhone users can create a nested folder by first moving the primary folder — inside which they want another folder to go — to the iOS dock. Then, they need to long press on any icon on their homescreen, so that its possible to move them around. They will then have to repeatedly tap the primary folder until the phone is struggling to keep up with their action, and then quickly tap and hold the secondary icon or folder.
Once the phone catches up, it will display the secondary folder inside the primary one. Users can now safely remove their finger from the screen and exit the customization mode.
You can repeat the steps above to create more than one nested folders.
Thanks to @plobold for the tip!