To install the library, first quit the Arduino application.

Then uncompress the ZIP file containing the library. For example, if you're installing a library called "ArduinoParty", uncompress ArduinoParty.zip. It should contain a folder called ArduinoParty, with files like ArduinoParty.cpp and ArduinoParty.h inside. (If the .cpp and .h files aren't in a folder, you'll need to create one. In this case, you'd make a folder called "ArduinoParty" and move into it all the files that were in the ZIP file, like ArduinoParty.cpp and ArduinoParty.h.)

Drag the ArduinoParty folder into this folder (your libraries folder). Under Windows, it will likely be called "My Documents\Arduino\libraries". For Mac users, it will likely be called "Documents/Arduino/libraries". On Linux, it will be the "libraries" folder in your sketchbook.

Your Arduino library folder should now look like this (on Windows):

  My Documents\Arduino\libraries\ArduinoParty\ArduinoParty.cpp
  My Documents\Arduino\libraries\ArduinoParty\ArduinoParty.h
  My Documents\Arduino\libraries\ArduinoParty\examples
  ....