It appears that the display string is the last element of the path, but this can cause potential confusion when the paths are very different, but the last folder is identical. Take for example "C:\Users\Public\Documents" and "C:\Users\<user_name>\Documents". Each of these will be displayed as "Documents" in the final UI, even though the first is probably more recognizable as "Common Documents" or "Public Documents". The icon appears to be different for each, but that's not enough to distinguish them enough without first browsing the path.