Permissions...
You have control over access to the system as root and have control over who else has access to which files on the system.
You can create separate log-in accounts, in different user groups, and specifying who has access to which files.
Putting certain data into one file or directory is not necessary to restrict control over the data. You can arrange your data files in directories and sub-directories as is logical and convenient according to the content of the files and use access to shape the content of several directories and sub-directories into one apparent location.
You can also give every one their own desktop to play with, with their own selection of programs and files, and the data content that should be reserved to them.
Which distribution were you thinking of using? Read their documentation on user accounts, user groups, ownership and permissions for the details.
http://www.tuxfiles.org/linuxhelp/fi...sions.html#why
http://linux.die.net/man/8/adduser
http://linux.die.net/man/1/chown
http://linux.die.net/man/1/chmod