The Criteria Library is where sets of criteria that are used within assessments are stored, and where you can create new sets using the default ones as inspiration (you can also do this on the fly within an assessment).
When you are later setting up individual assessments, the account’s default sets of criteria is loaded into each assessment by default – you can of course change each for another library set from within the assessment, of if you are an administrator you can tweak the criteria once loaded. If you do these changes will only be saved to that assessment (unless you save a copy of that tweaked set to library).
It is important to note that, once a set of criteria has been loaded into/associated with an assessment, changes to criteria sets within the Criteria Library will not impact assessments that used that criteria (i.e. a copy of criteria becomes embedded within an assessment once it has been loaded into/saved to it).