It's called the "Toolbar" function.
Maybe some of you already know this, but I just figured it out after getting my new computer and swearing I wasn't going to have 20 icons on my desktop within a week of purchase.
First, they look like this:

There's 25 icons within 1 click of my desktop organized into dropdown menus, plus an integrated mozilla address bar for quick internet access (sweet!)
So how did I do this?
Step 1: Create a folder for each menu/toolbar you want. You can put them anywhere, but for sanity's sake, I'd keep them all together and away from other potential clutter areas (I made a folder in my documents, then put all my toolbar folders in that new folder).
Step 2: Copy all your desktop shortcuts into the folders you created, organizing them however you want. *note: don't bother with the recycle bin. windows won't let you take it off the desktop anyway, which is the point of all this. anyway, one icon isn't so bad.
Step 3: Right click on the taskbar and go to the "toolbars" submenu. In there, click on "New toolbar..." In the dialog that pops up, find one of your toolbar folders and Click "OK."
At this point, there should be a fancy new toolbar/menu on your taskbar, but we don't want them there, since once we get any more menus, we won't be able to see the taskbar itself. So... let's move that toolbar.
Step 4: Unlock the taskbar by right clicking on it again and unchecking "Lock the Taskbar."
Step 5: Click and drag your new toolbar off the taskbar, and drag it all the way to the top until it snaps to the top of your screen.
Step 6: Re-lock the taskbar.
Step 7: Now just repeat step 3 for each of the other folders you made, except you can right click on the toolbars you've created instead of the taskbar. Then they'll be created at the top by default.
Step 8: Finally, to get the drop down menu effect, simply click the little bar on the left hand side of each toolbar and drag it to the left, covering up the icons from the other toolbars. These icons will be placed in a drop down menu, instead. If you want to be really fancy, you can have your toolbars switch order, so you can organize your new menus however you wish (I alphabetized mine

).
Also, take a look at some of the other windows toolbars that exist in that submenu by turning them on. The address bar is cool for me, because it takes the place of my firefox icon.
Step 9: After ensuring that they are properly in your dropdown menus, delete the icons from your desktop. (again, no-can-do on the recycle bin. oh well) Isn't it nice to be able to see your background again?

Edit: this seems a little confusing. I'll try to add printscreens tomorrow to make it easier to understand, but for now, time for bed.
Edit 2: I just remembered, if you want to add any new icons to one of your menus, drag and drop it onto that menu's arrow thing.