The thing with libraries is that once you create that link in the library, it is part of the library. So instead of setting up an application to look in multiple folders (say a music or photo program) you can just say 'look at pictures'. It will recognise pictures as one folder, and be able to access them instantly.
Libraries are extremely useful in a network sharing situation. Have some music stored locally and on the network? Add both locations to the 'music' library and then point your player at that library. No need to mess around with adding network folders in the player itself.
Oh, I agree wholeheartedly! Without the Libraries feature, it would be nearly impossible for me to manage close on 364,657 Pictures, Music, Video and Documents that are spread across 9 hard disks spanning just over 2TB. With Libraries, I have one Picture "folder". One "Music" folder. One "Programming" or "Downloads" folder.
I think the one hurdle that makes people not like Libraries, is that they are still stuck in the old "My Documents" metaphor, and do not realize that a single "Documents" library can include multiple locations.
I've grown so accustomed to utilizing Libraries combined with the Search features (first introduced in Vista), that the old Disk/Folder paradigm feels old and antiquated now...
I have 6 drives, and I just divide my stuff between them. I have foobar2000 monitor 2 drives totaling 1.5GB, rather than adding them to a library first. I have another drive for DVDs and I keep my general files and programming on a partition of my OS drive. I use 2 more drives for backing up my music and other important things. I have no need for libraries because I already have my computer organized fine using the folder structure, I just go Computer->Whatever drive I want->Subfolders.
The only place Windows Explorer has completely failed me has been in music folders where you need to view and arrange them by different criteria. Luckily foobar2000 exists and does the job perfectly, a lot better than Windows ever will I'm sure. I can mass write custom tags and sort my files based on any patterns and criteria I wish. I don't open my music directories any more in explorer, I can do absolutely everything from foobar and it's not a bloated app... what a glorious concept!
I like a few things about Windows 7, but I not where they add useless features. I don't like how they put libraries first everywhere, for me the Desktop should come first as that's the area where I'm actively working with temporary files and such. Libraries just seems to be a feature for lazy or stupid people who cannot figure out how to arrange their files in a tree, so they have a second tree to link branches of the first one!