Actually the Gallery scans all of the internal user memory and displays anything it finds the falls within the picture file extension parameters like JPEG, PNG etc.
The stock Android Gallery has no editing functions and a file manager is needed to move files, create folders etc.
Alternatively you could disable the stock Android Gallery and try something like QuickPic, available on Google Play. This Gallery app has much more functionality than the stock Gallery and is how IMO the stock Android Gallery should have been.
Give it a try.