Where was this “New folder” located? Did you put in the app’s own data folder? There should be no circumstance where the itch.io app is deleting your files outside of its installation location, or libraries that it manages.

I don’t have the code in front of me right now, but I’m assuming that when the app updates itself it cleans out the installation directory to ensure that no remaining files from the previous install cause issues with running the new version. You should not store files in itch’s install directory.

including any progress with these games  is gone

I have troubel understanding what you wrote. Mostly, where is the parent folder of your missing new folder?

Progress in most games is not stored in their game folder. Save games are located elsewhere, depending on the game. This is basically an industry standard for decades now. So I do not know what you mean with progress. Saving different versions of a game?

I recently tried out the itch app and it disturbingly has the default location in windows in appdata.   That is a data folder not a executeable folder. Also, it is a hidden folder.   I understand that this is probably because they do not need to write to the program folder this way, as it is a restricted folder. And yes, I saw that you can configure the game folder elsewhere in the app.

You sure you did not accidentally drag & drop your new folder elsewhere? Or deleted it, thinking it was a different new folder?

I can recommend using back up software in general. Your hard drives could also fail.

but I’m assuming that when the app updates itself it cleans out the installation directory to ensure that no remaining files from the previous install cause issues with running the new version.

a deinstall/clean should never remove files not installed. rm -rf for this purposes is a nogo. I just tested this with steam. As expected, the folder and file I created in a game folder are still there, after uninstalling a game. And itch app treats itself as an app, does it not.