Arduino libraries are a convenient way to share code such as device drivers or commonly used utility functions. This guide details how to install libraries on your computer. For an excellent introduction to Arduino libraries and what you can do with them, see the Libraries page from Arduino Tips, Tricks and Techniques.

There are three general types of Arduino Libraries:

Standard Libraries 

The Arduino IDE comes with a set of standard libraries for commonly used functionality. These libraries support all the examples included with the IDE. Standard library functionality includes basic communication functions and support for some of the most common types of hardware like servo motors and character LCD displays.

Standard Libraries are pre-installed in the "Libraries" folder of the Arduino install. If you have multiple versions of the IDE installed, each version will have its own set of libraries. For the most part, it is not a good idea to change the Standard Libraries or install your libraries in the same folder.

Library Manager Libraries

The newer Arduino IDE has a Library Manager which facilitates installing third-party libraries submitted to Arduino for use. Adafruit has most of its libraries and drivers in the Library Manager for easy use.

User Installed Libraries

There are many other libraries with useful functionality and device drivers for all sorts of hardware. These drivers are available from places like Arduino Playground, Github and Google Code. 

User installed libraries should be installed in your sketchbook libraries folder so they can be used with all versions of the IDE. This way, if a new version of the IDE is released, you don't have to re-install all your favorite libraries!