First: Albums have pictures; Folders have albums. Folders can also have folders.
The answer to your question is "link."
Pictures aren't exactly "in" an album. When you put a picture into an album, its name is added to a list of pictures to display together when the album is clicked, kind of like a music playlist, but for pictures. So two albums can both have the same picture name in their lists, and that picture will show up when you click either album, but there's only one picture file-- it's just on multiple lists. And when you remove a picture from an album, its name remains in the lists of other albums, and the file still remains in your Library.
So albums give a specific view of your pictures. The picture of "Aunt Ethel at the Grand Canyon" can be in the "Aunt Ethel" album with other pictures of Aunt Ethel, and it can also be in the "Grand Canyon" album with pictures of other people at the Grand Canyon. And it can be in a the "September 2015" album. Each album is pointing to a single file stored in the Photos Library, so having pictures in multiple albums takes up no more storage space. As you can imagine, this is very powerful in organizing pictures.
The Library View isn't really an "album"-- it provides a view of all of the pictures in the entire Library. You can't delete a picture from the Library View without deleting it entirely.
On an iPhone, you can create a Folder and create albums inside it. (On a Mac, you can move the albums between folders, but not on an iPhone.) That way you can have, say, 12 albums for the months all in a 2023 folder. This makes it easier to sort through all your albums. 10 years is not 120 things in a row, but 10 folders with 12 albums in each.
My iPhone would be a mess without albums and folders!