How to add new albums to my Iphone 4?

I've tried everything! My most recent try was to move all my photos on my windows pc and make folders in folders. I tried using the main folder to transfer on itunes but it didn't work. It said "No photos were moved because you're phone will be over capicity " Does that mean I will never add new photo albums on my phone? I know this is kinda obvious but i need suggestions! Please and thank you!

1) Click the Photos app
2) In the top right hand corner there's an edit button, click it
3) In the top left hand corner there's an add button, click it
4) Enter what you want your album to be called and click Save
5) TADA!

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