That is by design.
In XP "My Documents" folder was located in the user's profile directory, as Documents and Settings\<user name>\My Documents. "My Documents" was one of the many "Special folders". It was not an absolute path- a user could change the physical location of "My Documents" by right-clicking on the "My Documents" icon, selecting Properties, and entering a new folder location (path) in the Target tab.
Vista renamed "My Documents" as, "Documents". The "My" was also done away with from "My Music", "My Pictures" and "My Videos". These folders were now located directly under the user's profile directory (C:\Users\<user name>).
In Windows 7, The "Documents", "Pictures", "Music" and "Videos" folders show up in Windows Explorer with a "My" prefix but are actually still stored in the file system without the prefix.