Hi Lesley,
I think Kglad's link gives a good overview around the sharing features for the two. I'll try to explain the differences to you as well.
Creative Cloud files refers to the online cloud based storage. The files are stored online making them easily accessible for different computers or devices. Also, Creative Cloud files works in conjunction with File Sync. File Sync automatically synchronizes the Creative Cloud files folder on your computer to the online cloud storage associated with your Adobe ID. This part of the service is similar to other cloud storage solutions, like Dropbox, Google Drive, OneDrive, iCloud, etc. Think of this as JUST online storage.
Libraries have a cloud based aspect, but are really a feature for being able to work with assets by dragging them in and out of the Libraries panel(s) within the desktop products (Photoshop, Illustrator, Premiere Pro, Dreamweaver, etc.). It is really just a way to make certain assets easily accessible and ready for future use/reuse. Here is a quick rundown about the kinds assets you can put into Libraries - color swatches or groups of color swatches (color themes), custom brushes you created for use in Photoshop, Illustrator or Adobe drawing/painting mobile apps, graphics content like a jpeg images or Photoshop files (with layers), or vector based image data, Layer styles (like in Photoshop), Character Styles to set text to a specific font and size, Patterns for seamless repeating patterns, and Looks, for matching the mood of an image to a video.
So the two features have different uses. A lot of the Library content can be created from the Adobe mobile apps and uses the internet and your Adobe ID to transfer them to the Library panels within the desktop products. If you look at your online storage Libraries are listed there, but they are separate from the file storage. Libraries don't exist as actual files on your computer until you drag and drop them out of the Library panel. Libraries are more limited as far as being able to organize too, you can't create folders within folders like you can with the file storage (as you described). You can put all different kinds of files in the cloud storage whereas you can only put certain types of content in to Libraries. It sounds like you may have thought there was more interoperability between the two than we have currently available. Both are still being improved and will most likely change with new features and functionality being added.
Hopefully that all makes sense and is helpful. I know you mentioned you already looked at some of the help documentation but these might be helpful to look at as well if you haven't seen them.
Creative Cloud Files
https://helpx.adobe.com/creative-cloud/help/sync-files.html
https://helpx.adobe.com/creative-cloud/kb/file-storage-quota.html
Libraries
https://helpx.adobe.com/creative-cloud/how-to/creative-cloud-libraries.html
https://helpx.adobe.com/creative-cloud/help/libraries.html
Best,
- Dave