Image and File Libraries
The image and file libraries are used to store things like photos, PDF files, MS Office documents, and other resources used on your site. The image library needs web compatible images, but the file library can contain any type of file found on your computer.
To manage these files, the libraries allow you to create groups (or Folders) that contain other groups or files/images. Rather than filling up your library with hundereds of files all in the top level, it is often helpful to break them up into meaningful divisions that reduce the clutter. The grouping mechanism allows you to do this. Beware, howeve,r that by moving a file or image, you change how it is referenced, and any places that use that image or file, even in your live site, will need to be changed.
The images and files of your site are often the largest disk space users. To minimize this, overhead only one copy of each file in your file library is kept. This means that any changes to a file or image in one of your libraries will also affect any part of your live site that refrences it.