IFS directory permissions

I am starting to learn how to use RPGLE as a CGI language (using the IFS to 
locate the html code) and have come across something that looks a bit out of 
the ordinary, at least to my meager unix background.

When I create a directory the permissions are set so that its permissions look 
like this:

drwxrwsrwx  2 NODONF   0                 36864 Apr 30 09:57 images

notice that that setgid is active.

Ordinary when I create a directory in a native unix environment it should look 
like this:

drwxrwxrwx  2 NODONF   0                 36864 Apr 30 09:57 images

with the execute permission active for the group level.  


>From what I understand of the setuid and setgid permissions is that they are 
>somewhat similar to adopt authority of the owner(setuid)/group(setgid).  So if 
>I am correct in that assumption then someone in the "other" category (since 
>this directory is executable by everyone) could navigate to that directory and 
>then once it is the current directory could have whatever rights there that 
>the owner's group would have even though "other" did not).  Including read & 
>write permissions on files.  

Is this the normal setup for creating directories in the AS/400 IFS? Am I 
misinterpreting the effects of this permission setting?  Or does something need 
to be tweaked on our system.  

Thank you,
Don Freeman