That code isn't reliable, nor is it designed to be. perldoc perlop perlvar will tell you that $0 is the name of the currently running script. It isn't supposed to be the current working directory and that assumption is easily broken by calling a script from another directory.

Use the core module Cwd if you need the current directory. Use another core module, File::Find if you want to process files from there.

HTH.

Update:
D'oh, $0 and other fun variables are documented in perldoc perlvar, not perldoc perlop.