Windows 7 :Library Documents

I Understand Windows 7 now has the library directory for documents etc. I just want confirmation, I think the library is actually an index of the actual documents folder, is this correct? When I save my documents the default always comes up as library/documents and I feel I should be changing this to save to documents.

http://msdn.microsoft.com/en-us/magazine/dd861346.aspx

This link might help