Hi @rhammell.
Libraries are the mechanism by which code is shared between multiple sketches in the Arduino world.
The location of the sketches is completely irrelevant to your goal.
The sketchbook is a convenient place to store sketches, and Arduino IDE does make it easier for the user to access these sketches via the File > Sketchbook menu and the "Sketchbook" panel. However, when it comes to compiling the sketch, there is absolutely no technical difference between a sketch stored under the sketchbook folder and one stored outside the sketchbook folder.