The receiving folder is a dedicated folder in the user account where the contacts will be stored temporarily until the contacts are recycled. These can be created or assigned by an admin during the LeadStream setup.
You must use a folder that is different from the distribution folder as a receiving folder. You can create a dedicated one using the create new folder option when creating the lead stream.
If you are a dialer and there is no receiving folder available in the Receiving Folder drop-down menu when accessing a LeadStream from the leads tab, this means the admin has locked the folder and it can't be changed.