For now, you need to have the pre-release version installed for DX:
sfdx plugins:install salesforcedx@pre-release
Make sure you've also updated all extensions, including Lightning Web Components, which is not currently part of the Salesforce Extension Pack.
Often, simply restarting after installing/updating all extensions and the pre-release sfdx plugin will automatically create the lwc folder for you. You may also need to close and re-open the folder for it to take effect. I'm not sure how/why my lwc folder appeared, but it wasn't obvious as to what I did.
If all else fails, create a new project in a new, empty directory, and copy the lwc folder back into
force-app/main/default/, so that it has two files:
Once you've done that, you'll stop getting that error and be able to create new components. These config files may require modification if you copy from a new project, so make sure you check the file paths of jsconfig.json. Every time you create a new component with sfdx, jsconfig.json will be updated with more metadata, so make sure you commit this file if you're using a repo.
NOTE: Even though you'll be able to create files locally, to push to the server, you need a pre-release org for now, since all new LWC features are tied to API 45.0 and later, while all production and scratch orgs will be 44.0.