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If you installed as administrator, the libraries folder you seek is under C:\Users\username\Klayout. If you didn't install as administrator I think it is somewhere funny like C:\Users\username\Appdata\Local\Klayout..... Or something. You are correct about how to use the folder. You must restart KL after moving a GDS or OAS file there though
@David: thanks for this answer - you really got the point :-)
Regarding the last question: yes, the library name is used as the name shown in the dialogs for this library. And you should use GDS2 because other formats don't support the library name.
Minor point to add (correct me if I'm wrong Matthias):
One might read Matthias's comment to say that you can't use OAS to create a static library in this manner, but you can. He was just saying that in GDS2 you can define a custom library name independent from the filename, if I understand correctly.
The library name for GDS2 will be specified in the library name field in the save dialog -- you can make it whatever.
The library name for an OAS file saved in this location will be the filename itself. So, save it as some short filename like MyLib.oas, so that it isn't too wide for the dropdown menus where it shows up.
You might desire OAS instead of GDS2 static libraries because OAS is a newer file format and stores other things nicely. For example, the alphanumeric layer name is lost when you save as GDS2, though that doesn't matter when you're instancing it in a file with layers that have names, but it can be nice to have names in the library file as you work on that separately). You can read about other differences on the interwebs if you're interested. As for me, I only use OAS.
Nothing to correct, David :-)
I personally favour GDS2 because I feel that having library name and file name separate is some advantage. For example, you call the file "MyLib_V1.0.6.gds" and still have a library name that is "MyLib". But that's a matter of taste.