Libraries are identical to the concept you're hopefully already familiar with. They are how we make use of code that our team/organisation hasn't written.
Even though most libraries do have dependencies on other libraries, we chose not to represent that in Polylith. Instead each library is represented as a flat tile which becomes the "roof" of a service's dependency structure. This keeps the representation simpler and ensures that we're not concerning ourselves with details that aren't usually relevant for our work.