A folder is corrupt/infected and points to itself. So subfolder is its own parent. Utility could just purge entry from directory table. Then Diskchk can be used to fix misallocations.
You aren't referring to the C:\ProgramData\Application Data in Windows 7 by any chance? This is a (multiple) redirected folder that points to itself (I don't know why, but MS thought it was a good idea). It may be because C:\ProgramData\ is a target of C:\Users\All Users, so legacy apps that use "C:\Users\AllUsers\Application Data" get pointed to C:\ProgramData folder.
There are a lot of redirected folder in Vista/7 (and some even in XP), but I think only Vista/7 have ones that point to themselves.