This is an old post. For the most updated information, see this post
What is the mu-plugins folder?
One noticeable difference in the file structure between WordPress and WordPressMU is the addition of the mu-plugins folder. Files placed within this folder will be executed automatically.
If the plugin requires a hook into the plugin activation sequence, it will not be compatible with this auto-execution directory. If this is they case, you will either need to contact the plugin author and recommend a potential fix, or code one up yourself for your own use.
Plugins places in the mu-plugins directory will not show up in the Plugins menu.
Many plugins written to go specifically in this folder do not have an admin panel to show up in the admin area. These plugins usually have code that needs to be added somewhere, and it will mention this either at the top of the plugin’s file or in the plugin’s readme (if it has one). Since this feature is exclusive to MU, regular WordPress plugins placed in this folder may or may not work. If they do not work, it may be a small change needed to the code of the plugin in question. Each case is different and you will either have to read the code of the plugin or ask the plugin author. Please test new plugins one at a time.
Care should be taken as to what plugins are placed here, as and excessive amount will cause your site to slow down or use up resources, as code in this folder is executed on a continuing basis.
(props to lunabyte for clarification)