The library function can be useful if you have a lot of a certain type of file. For instance, I have a lot of video files that are spread across two hard drives, as they wouldn't fit on one. Using libraries, I can organize these all in the same place.
Don't get me wrong, it's not the huge revolutionary feature that Microsoft's making it out to be, and in a way it's distancing users from how a file system actually works. But they do have their uses though.