Hrmm. Lemme think here. *ouch*. That hurt.

Ok.

Read let's you see inside the directory (get a listing)
Execute allows you to enter the directory (cd)
Write allows to delete/add items to a directory (cp or mv or rm, etc)

So. To prevent the users from going seeing each others directories one of two things:

chmod uo-rxw on the main parent directory (assuming they default start in their home directory).

OR

use chroot to make it a "jailed" environment.