When a folding stock is folded, the weapon is less accurate (DM –1 at all ranges). When the stock is extended, there is no effect.
Well, for me, this is the most intuitive effect.
Without the folding stock extended, you're using the rifle as big, two handed pistol which, while flashy in movies, is simply not as stable as using the stock as intended.
Now, folks can quibble about stock quality and what not, but that's honestly beyond the scope of the game. If a gun is WORSE with the stock extended, why even have it?
Also, there's a difference between a "folding" stock, and an "adjustable" stock.
Moder ARs have adjustable stocks so the user can get a better fit when firing the rifle, notable to adjust for things such as battle armor. But that's different from a folding stock in that most adjustable stocks, once adjusted, are pretty much kept that way.
Folding stocks are used to reduce overall length, notably for storage, but also for concealment.