Custom items that have a physical file representation on disk should registered their file extension within the Config.daml so that they can be browsed within Folder collection in Catalog. Registration is within the esri_customItems category and should include the fileExtension of your custom item and keywords that can be used in the Catalog search. Note: The Pro SDK template for custom items will automatically generate a set of Config.daml entries for you.
Custom items that can contain child items should set IsContainer=true. The custom item Fetch method is called when the item is first expanded in the Catalog to allow custom items to retrieve their child items

Reference

CustomItemBase Members
ArcGIS.Desktop.Core Namespace