iTunes: About the Add to Library, Import, and Convert functions
iTunes uses the terms Add to Library, Import, and Convert to describe different iTunes functions. Here's what these functions do:
Add to Library
iTunes creates an index of all music, audio book, and video files that are added to iTunes so you can access them quickly. This index is called the iTunes Library. When you add something to the library, essentially you are taking existing audio or movie files and adding an entry for each to your iTunes Library index. The files can be in your Home folder, somewhere else on your hard drive, on an external hard disk, or even on another computer that you are accessing through file sharing.
If you want to add files to your iTunes library, you can drag files from the Finder to the appropriate icon on the left side of the iTunes window, or choose File > Add to Library (on Windows, choose Add File to Library or Add Folder to Library) and then select the song file or folder you want to add. iTunes adds entries in your iTunes library for the selected files, and copies the files to your iTunes Music folder (if you have that option selected in the Advanced pane of iTunes preferences).
Note: When you add unprotected WMA files to your iTunes library (Windows only), iTunes converts them to new files that iTunes can play, based on your import settings.
Choosing File > Library > Import Playlists allows you to import playlists and other data files into iTunes. Note that this functions differently than the Import CD button, which allows you to import songs from audio CDs into your library. The Import CD button is present in the lower-right corner of the iTunes window only when you have an audio CD selected on the left side of the iTunes window.
When you import a CD audio files will be created using the specifications set in the Import Settings in the General pane of iTunes preferences and are saved in your Music folder.
iTunes gives you the ability to convert music files from one file format to another. You can also convert a file to the same format, but use different options. For example, you can convert high-bitrate MP3 files to a lower bitrate to fit more of them on an MP3 CD. Note that protected music purchased from the iTunes Store can't be converted. See "iTunes: How to convert a song to a different file format" for more information.