Do model names need to be unique?

Within one project: yes! To build dependencies between models, you need to use the ref function, and pass in the model name as an argument. dbt uses that model name to uniquely resolve the ref to a specific model. As a result, these model names need to be unique, even if they are in distinct folders.

A model in one project can have the same name as a model in another project (installed as a dependency). dbt uses the project name to uniquely identify each model. We call this "namespacing." If you ref a model with a duplicated name, it will resolve to the model within the same namespace (package or project), or raise an error because of an ambiguous reference. Use two-argument ref to disambiguate references by specifying the namespace.

Those models will still need to land in distinct locations in the data warehouse. Read the docs on custom aliases and custom schemas for details on how to achieve this.