To specify libraries to be included in the game, select "Libraries" from the "Game" menu. The Library window will show you all the libraries that are accessible to your game - those that are in the Quest directory, and those that are in the same directory as your game's ASL file. Select only those libraries that you wish to use - information about each library is displayed at the bottom of the window when it is selected.
You'll need to save your game before QDK will know which directory (other than the Quest directory) to look for library files in (you'll see at the top of the window if QDK has only looked in the Quest directory). So, if you want to use a library that's not in the Quest directory, your game needs to be saved in the same directory as the library.
Libraries can add their own interface elements - that is, additional script command categories, plus extra tabs on the game, room and/or object editing screens (if you're a library author, see QDK Library Interfacing for information). All libraries selected on this window will be scanned for interface elements, except for libraries which have been added manually by using the "Add" button and typing in a library filename - you'll see a message in the information pane if Quest was unable to search for interface elements in this library.