The conversation view displays your messages grouped by subject. Because all messages in a conversation have the same subject, the subject displays only once in the conversation view pane. All messages related to the conversation are displayed, even if they are stored in different folders.
You can read messages grouped together in context and ordered by date, including replies and forwarded messages. In order for a message to be grouped in a conversation, the subject of the message must be the same.
For example, the following subject lines would be considered part of the same conversation.
However, if you change the title to "who's in charge of the project? - ask Mike," the message would not be included in the conversation. It would be part of a different conversation.
Conversations do not continue indefinitely. If the last message in the conversation is 30 days old or older, messages sent with the same subject begin a new conversation.
If a conversation includes three mail messages, one of those messages could be in your Inbox, your reply (which is also part of the conversation) will most likely be in your Sent folder, and another message could be in a custom folder.
What this means:
If you search for mail messages and one message is found that matches your search, but that message is in a conversation with several other messages that do not match your search, the entire conversation and all messages within it are listed under the search results. When you open the conversation, only messages that match your search criteria are highlighted.
The same conversation may appear to exist in more than one folder. This can happen if the mail messages are in different folders, either because you moved them there, or you applied a filtering rule that put them there when they were received.
Because a conversation is a group of related messages, if you move a conversation from one folder to another, all messages within that conversation are also moved to that folder.