This is the intended structure :
1. the Music folder in your own Mac user account - then in there :
2. the iTunes folder, the top level - then in there :
3a. the iTunes Music folder with all your music (in sub-folders organised by Artist / Album if you kept that default Preference)
3b. the iTunes Library database file, with the path to all your music in iTunes, plus your playlists, ratings, play counts etc
3c. the iTunes Music Library.xml file, which has much of 3b, and may be needed by other apps.
The terms you need to remember are : MUSIC FOLDER (which is where your music actually lives), and LIBRARY which is the database file (3b) pointing to where your music lives, playlists, etc.
A music folder on its own is useful outside iTunes as it contains all the music files. The Library on its own is useless, unless it is paired with its corresponding Music Folder.
So, you can put Library files wherever you like, but they need a 'paired music folder' or at least music files to be in expected places.
If you have music that is not in your current iTunes (maybe from an earlier computer), then you can Add To Library to bring them in (or drag / drop them onto iTunes). It doesn't matter if they are also in another 'Library' - as soon as you import them they are in your current iTunes.