That is not your \GAMES\ folder, that is your \game\ folder.
Again:
Originally posted by another user
Games on your PS3 will be in your \GAMES\ or \GAMEZ\ folder, while PSN games and game updates will be in the \game\ folder.
\GAMES\ folder, not \game\
There is a major difference.
\GAMES\ or \GAMEZ\ has your PS3 disk games copied to it.
\game\ is the PS3's normal folder used for installing game data, game updates, and PSN games.
Elf files in \game\ requires npdrm encryption, elf files outside of it require non-npdrm encryption.