Your code will loop forever! There's no terminating condition for the "Do".
This may be closer to what you're trying to do:
$strPrefix = 'test folder'
$intPad =0
$intfolders = 10
$i = 1
do {
New-Item -path C: -name $strprefix$intpad$i -type directory
$i++
} until ($i -eq 10)
New-Item –path C: -name $streprefix$i -type directory