The idea is to make it appear to your sync app that a folder is inside it’s watched folder, when it is in fact somewhere else entirely.
Use either the JUNCTION utility from Sysinternals, or the MKLINK command built in to Windows Vista, Windows 7 and Server 2008, for example:
junction "C:\Documents and Settings\User\My Documents\My Dropbox\DesiredFolder" "C:\Path\To\DesiredFolder"
mklink /D "C:\Users\Steve\Documents\Dropbox\DesiredFolder" "C:\Path\To\DesiredFolder"
Or, if you prefer a GUI, install Link Shell Extension.
OS X or Linux:
Use the ln command, for example:
ln -s /path/to/desired-folder ~/Dropbox/desired-folder
This works with files too:
ln -s /path/to/desired-file ~/Dropbox/desired-file
Another easy way to do this with Terminal is type the ln -s part, then from Finder drag the folder/file that you want into the Terminal window then drag the Dropbox folder and hit return.