By default - that is, unless you specifically change a setting in the preferences - your photos are copied into the open library when you import them to Photos. That Library resides in your Pictures Folder. You access the files via Photos and the many sharing and export methods it offers.
You can have multiple libraries. In most cases though, you won't need more than one. Multiple libraries can be inconvenient - you can only search the open one, for instance, and only on can be the System Library. So, think carefully before deciding on multiple libraries.
Libraries are quite independent of each other. Photos can be in multiple libraries, but only if you import them that way. And having the same photo in multiple libraries uses up disk space.
An Album is an ad hoc collection of photos within a Library. Basically, you can group photos together on any basis you like in an album: Our Wedding, Dog Photos, Christmases over the Years, whatever. Photos in Albums are not duplicates, they simply reference photos in the Library. So, a snap can be many albums and use no extra disks space.
I would like to store related photos in a separate album. Example: A library for a family, containing albums for family members. Possibly having duplicate photos in different albums.
I note that in this you use Album and lIbrary as synonyms and they are not. Couple of ways you can do this:
One Library.
Use the Faces feature to identify family members. Now you automatically have an album for each person.
or
Use keywords to identify people (or events)
Then use a Smart Album to group these - and again, the same photo can be in multiple locations using no extra disk space.
or
Make an album and drag and drop the pics to it.
That's the most efficient way of doing it. I wrote the following for iPhoto and it pretty much holds true for Photos too.
I use keywords and Smart Albums extensively. I title the pics broadly.
I keyword on a
Who
What
Where basis (The When is in the photos's Exif metadata). I also rate the pics.
Using this system I can find pretty much find any pic in my 70k library in a couple of seconds.
So, for example, I have a batch of pics titled 'Seattle 08' and a typical keywording might include: John, Anne, Landscape, mountain, trees, snow. With a rating included it's so very easy to find the best pics we took at Mount Rainier.
File -> New Smart Album
set it to 'All"
title contains Seattle
keyword is mountain
keyword is snow
Photo is Favourite
Or, want a chronological album of John from birth to today?
New Smart Album
Keyword is John
Set the View options to Sort By Date Ascending
Want only the best pics?
add Photo is favourite
The best thing about this system is that it's dynamic. If I add 50 more pics of John to the Library tomorrow, as I keyword and rate them they are added to the Smart Album.
In the end, organisation is about finding the pics. The point is to make locating that pic or batch of pics findable fast. This system works for me.