If you want to make a package, you have to understand how Python translates filenames to module names.
The file mymodule.py will be available as the mymodule, assuming the interpreter finds it in a directory in the Python search path. If you're on a case-insensitive filesystem, it might also be importable with different capitalization (but you should avoid using such system-dependent behavior).
A package is a directory with an __init__.py file in it. There's been some movement recently to allow packages without those files, but I'm going to ignore that less-common case for this answer. A package becomes a module inside Python, with its code coming from the __init__.py file. So the file mypackage/__init__.py can be imported as mypackage.
There's no meaning to an __init__.py file directly in the Python search path (well, I suppose you could import it an an __init__ module, but this is probably a bad idea).
So, for your situation, here's the appropriate filesystem layout:
toplevel/
mymodule/
__init__.py # put code here for mymodule
submodule.py # put code here for mymodule.submodule
Only the toplevel folder should be in the Python search path.