You make the folder if it does not exist. Note that this only applies to when you want to make it a Workshop Config (as the folder only makes sense to create in an Addon folder).

If you want a thumbnail for your local config, you can just place it inside the config's folder itself and name it the same as the folder. For example data/nzombies-unlimited/localconfigs/myconfig/myconfig.jpg

When you put it in a Workshop addon you will move this image to materials/nzombies-unlimited/configthumbnails/myconfig.jpg as Workshop does not allow images outside the materials folder.