It comes with a library. A media library can read metadata from content and use that to build up an index, or it can monkey around with the location of the content by copying or moving it to some special folder and then read the metadata there.

Ideally, software supports both ways of working (lots of people prefer to have the software take over, lots of people are worried this will make a mess, or don't want to live with some constraint the software imposes, or whatever).

Calibre will only index content imported into its library.

I suspect that the parent was asking whether Calibre will index books where you put them on your hard drive, rather than insisting on moving them into a directory that it manages. (For example, iTunes will index your music, but iBooks insists on managing your books.)

It means: If you have an existing ebook library, with whichever folder structure. And you ask Calibre in import it, it will go ahead and copy every single file from your folder structure in to its own inside "My Documents" (or one of the other user folders, can't remember.