You can choose to have disk images created in the same folder as the source folder (Next to Source), or specify a folder where images should be saved (by choosing Other… or dragging a folder onto the settings window). The Ask Later option causes DropDMG to ask you, for each operation, where to save the disk image or archive.
If the destination folder that you specify ends up being invalid (e.g. you specify a destination folder that’s contained by the source folder), DropDMG will revert to its default behavior of Next to Source.
The bottom portion of the pop-up menu lists recent folders and favorite folders. Recent folders are the last 10 folders that you’ve chosen. Favorite folders are always shown in the menu, even if you have not used them recently. To make a recent folder into a favorite folder, find the folder’s alias in the folder:
/Users/<username>/Library/Application Support/DropDMG/Recent Folders
or:
/Users/<username>/Library/Containers/com.c-command.DropDMG/Data/Library/Application Support/DropDMG/Recent Folders
To open the library folder, see the How can I open the Library folder? section.
Select the alias and open the Finder’s Get Info window. Then click the Locked checkbox.