Yes, you're correct. I think the changes were made in Lion.
You only have the three categories you mentioned in Mountain Lion's sidebar. You can drag then into the order you prefer and the Finder's preferences give you some control over what appears in each category. You can drag 'n drop folders and saved searches (and probably more) into the Favourites section of the sidebar.
|Autumn by valenttin|
from Harvest Festivals
|Cardinal, Male by paul katinas|
from A Big Year - birds
|.. by Amar Vignesh|
from Unintentional Blur
|Freeze Time by WhistlerOne|
|Sir Mick Jagger by HetFotoAtelier|
from - Concerts : When The Lights Come On -