For more about what makes iTunes run read:
What are the iTunes library files? - http://support.apple.com/kb/HT1660
More on iTunes library files and what they do - http://en.wikipedia.org/wiki/ITunes#Media_management
What are all those iTunes files? - http://www.macworld.com/article/139974/2009/04/itunes_files.html
Where are my iTunes files located? - http://support.apple.com/kb/ht1391
iTunes 9 [and later]: Understanding iTunes Media Organization - http://support.apple.com/kb/ht3847 - plus supplemental information about organizing to new structure https://discussions.apple.com/thread/6477809?answerId=26404702022#26404702022
Image of folder structure and explanation of different iTunes versions (turingtest2 post) - https://discussions.apple.com/docs/DOC-7392 and making an iTunes library portable.
Basically when you add a file to iTunes it puts it in a folder structure according to the labels on the file, then it makes a note in its catalog file where the file is located. It displays the track information in iTunes and when you click on the track to play it looks up where the file is located and goes to that place. iTunes does not actively inventory the media folder, it relies purely on its own record as to where files are located. So if anything moves a file and iTunes does not know about it then it does not know where the file has gone. iTunes itself may move a file to respond to changes made inside iTunes such as renaming a track, or if you use iTunes to relocate media from one place to another.
Are these two users sharing the same media files but have two different library files? If they are and one user edits the track information this may cause the file to be relocated by the one iTunes library. The second library will not know this has happened and cannot find the files where it expects them to be.