Windows 7 manages media files differently than previous Windows OSs did. It retains the familiar Pictures, Videos, Music, and Documents folders, but you can assign additional library locations in order to collect your media files more dynamically.
The libraries in Windows 7 organize file types to help applications find media more easily. By default, programs look to the Pictures, Videos, Music, and Documents folders instead of having to scrutinize your whole disk. Windows XP and Vista tied media libraries to those specific folder locations. For example, Windows Media Player watched vigilantly over C:\Users\[username]\Music. Then, anytime you added new audio files to that folder, Media Player showed them in your music library. If you wanted Media Player to look for media in other areas--say, in the iTunes music folder or in another user's music library--you had to add the new locations manually within the program.
In Windows 7, the Pictures, Videos, Music, and Documents folders are not the only doors into those libraries; you can add any other disk location you like, and library-savvy applications will automatically pool media wherever it's stored.