I managed to get photo1.jpg to save to the Pictures/mockFolder I created on the SD card, here's the code for future reference.
public class CameraActivity extends Activity
{
    final int PICTURE_ACTIVITY = 1; 
    @Override
    public void onCreate(Bundle savedInstanceState)
    {  
        super.onCreate(savedInstanceState);
        String dir = Environment.getExternalStoragePublicDirectory(Environment.DIRECTORY_PICTURES) + "/mockFolder/"; 
        File newdir = new File(dir); 
        newdir.mkdirs();
        String file = dir + "photo1.jpg";
        File newfile = new File(file);
        try {
            newfile.createNewFile();
        } catch (IOException e) {}       
        Uri outputFileUri = Uri.fromFile(newfile);
        Intent cameraIntent = new Intent(MediaStore.ACTION_IMAGE_CAPTURE); 
        cameraIntent.putExtra(MediaStore.EXTRA_OUTPUT, outputFileUri);
        startActivityForResult(cameraIntent, PICTURE_ACTIVITY);
    }
    @Override
    protected void onActivityResult(int requestCode, int resultCode, Intent intent) {
        super.onActivityResult(requestCode, resultCode, intent);
        AlertDialog msgDialog;
        if (resultCode == RESULT_CANCELED) {
            msgDialog = createAlertDialog("Alert", "Picture was not saved. Please try again.", "OK");
        } else {
            msgDialog = createAlertDialog("Alert", "Picture was saved successfully.", "OK");
        }       
        msgDialog.show();
    }
    private AlertDialog createAlertDialog(String title, String msg, String buttonText){
        AlertDialog.Builder dialogBuilder = new AlertDialog.Builder(this);
        AlertDialog msgDialog = dialogBuilder.create();
        msgDialog.setTitle(title);
        msgDialog.setMessage(msg);
        msgDialog.setButton(buttonText, new DialogInterface.OnClickListener(){
            @Override
            public void onClick(DialogInterface dialog, int idx){
                finish();
            }
        });
        return msgDialog;
    }
    public void finish()
    {
        super.finish();
    }
}
You probably have to create your new File too.
After you have done File file = new File(path);, call createNewFile();
Or rather: 
String dir = Environment.DIRECTORY_PICTURES + "mockFolder/"; 
String name = "photo1.jpg"; 
File file = new File(dir, name); 
file.createNewFile();
You could improve your code by calling newFolder.mkdirs() instead of newFolder.mkdir(). mkdirs() creates all the folders needed in the path specified.
Also, you forgot to add a slash after Environment.DIRECTORY_PICTURES when you set the path variable.
Also, make sure your app has permission to write to the sd card.
Add this to AndroidManifest.xml:
<uses-permission android:name="android.permission.WRITE_EXTERNAL_STORAGE" />
Environment.DIRECTORY_PICTURES only contains the folder name for the pictures. You need to provide a full path to the location.
File path = Environment.getExternalStoragePublicDirectory(Environment.DIRECTORY_PICTURES);
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