When you install something from source you go into the site download the tarball then you extract everything, and when you are done you have a folder with everything in it. If you run ./configure then make and then make install where do these programs install on a normal bases? Do they require that folder to run or can it be deleted, I know this may depend on the program but on a normal bases what happens. An example would be great! If it stays in the same folder how should I install the program in a common spot like /usr or where ever these things are normally installed.

The stuff should go to /usr/local, but I think it's up to whoever made it. You don't need the stuff you extracted after you install, but you'll have to compile again. To change where the program is installed, you add options to ./configure. I think one is called 'prefix=', used like this for /usr:
./configure --prefix=/usr
Check out Checkinstall, it lets you handle source stuff like regular packages.