The iTunes library is a single-window system that's a direct influence of Steve Jobs's no-file-system philosophy. Jobs always wanted to shift from the file-folder interface to a more streamlined, purpose-oriented, simplified interface and that's what you see with iTunes which manages your music much better by taking all the work out of music management.
Interestingly, music and videos are a large part of our lives and libraries. So, what happens when you've got tons of data – music albums and videos – which you want split across the computer (and probably an external drive) and still have them under a single library in iTunes? Surely, that isn't possible, is it?
I'm particularly stingy with my storage but I've got friends who have several GBs of data, some of them having over 1 TB of music stored. I really don't know how people actually manage to find time to listen to most of this library but managing this in iTunes is hardly possible if you've got to split the music files into several folders and drives.
On iTunes, however, you can do this. The trick is to disable files being copied into the media folder of iTunes and instead, creating just a link or a pointer to the original files. This way, you make iTunes link to the music and not store all music under its folder.
Here's how to split iTunes library into across multiple locations:
Step 1: First, sort all your music into different drives/folders as you see fit. Make sure you remember the way you've configured this sort because managing a ton of music manually is a little hard.
Step 2: Open all the drives / folders where the music is stored (and which you want to create a library of)
Step 3: Open iTunes
Step 4: Now, on a Mac, click the Option key (keyboard) and drag all the music files to the iTunes window. The library will be populated but iTunes won't copy the files to its own media folder. Pretty simple here.
Step 5: If you're running Windows, you'll have to head over to “Advanced Preferences” (iTunes Prefernces -> Advanced) in iTunes and disable (uncheck) “Copy files to iTunes Media folder when adding to library”