It could work either way. Its behavior is controlled by an Option that you can set at Edit > Preferences > Advanced, where you can check or uncheck "Copy files to iTunes Media Folder when adding to Library."
Most iTunes users keep this option checked.
To see where the file is for a track already in your library, right-click the track and choose "Show in Explorer."
I have a large music folder which I imported to iTunes liberary.
Does iTunes copy the files into the library or just keeps an index of the original files?
if the files are copied it means I have duplicate music library which takes a lot of disc space. how can I avoid it?
When adding to iTunes, move the files to //Music/iTunes/iTunes media/Automatically add to iTunes/ folder.
This will move, not copy the files.
Keep a shortcut to this folder on the desktop then just move files to it to add to iTunes.