Library is a set of frequently used functions, which can be included by Expert Advisors, Custom Indicators and Scripts.
Libraries are stored in
experts\libraries subdirectory of the terminal directory (e.g.
C:\Program Files\MetaTrader 4\experts\libraries). In addition to library's main
mq4 file any library needs to have corresponding header file with extension
mqh. The latter is stored in
experts\include subdirectory of the terminal directory (e.g.
C:\Program Files\MetaTrader 4\experts\include). The header file contains almost inclusively functions’ signatures (i.e. names and parameters).
A good example of library is a set of functions executing repeatedly trading functions, which makes placing orders more reliable and safe.