As of Arduino 0017, you can install contributed libraries into the libraries sub-directory of your sketchbook directory. Moving libraries outside of the Arduino application directory means that the libraries will stay installed when you upgrade to a new release of the Arduino software. It also means that, on the Mac, you don’t need to search around inside the new Arduino.app to install a library.

Before installing your first library, you’ll need to create the libraries directory. Then, simply unzip the library into it. When you restart Arduino, the library should appear in the Sketch > Import Library menu. Any examples for the library should show up in the Files > Examples menu.

Your sketchbook is typically stored in a directory called Arduino in your documents directory. The exact location is shown in the preferences dialog in the Arduino software.

Extra note for developers and Linux users: In Arduino 0017, libraries are no longer pre-compiled when you make a selection from the board menu. Instead, they are compiled with your sketch, like the Arduino core. This means that you don’t need to delete .o files when making changes to a library’s source code. It also means that Arduino shouldn’t write to any files in its application directory, making it easier to install on Linux. Plus, there’s no more delay when switching boards.