See http://arduino.cc/en/Guide/Environment#libraries for instructions on installing libraries.
Also a good posting here if you are still confused:
http://arduino.cc/blog/2009/08/15/new-library-folder-and-compilation-process-in-arduino-0017/
Generally, if you have not already created your libraries folder, you will need to do that.
You can look for where Arduino thinks your folder should go by opening Arduino and going to Preferences. Then just look for your "Sketchbook location:" path. Go into that folder, and create a "libraries" if there is not already one there. Then, just drop any library you want in there. You may need to restart Arduino to get it to show up.
If a project I am using has a LICENSE, or README file, I will prefix it with the Lib name in my Libraries folder.