Welcome to the forum. Yes you missed quite a bit. Notice the part in bold letters below. So what is a library?
In many ways, a Library is similar to a folder. As we mentioned before, when users open a Library, they can see one or more files or folders. However, unlike a folder, a Library can display files that are stored in several folders at the same time. This is a subtle, but important, difference. Libraries don't actually store items.
They monitor folders that contain a user’s items, and provide a single access point and rich view pivots (by file Type, date or author) of this aggregated content. Libraries promote a user’s data and let the file system fade into the background.
Read more here. Understanding Windows 7 Libraries - Windows 7 for Developers - The Windows Blog