Can multiple devices share the same library?

Question

I was under the impression they could not. I had originally had iTunes installed with my 5th generation iPod. Several months back my wife got an iPhone 4. We were under the impression we had to set up a library exclusive to her device, so we did. I had to open my library when I wanted to sync to my iPod, she had to open hers to sync to her iPhone. Now I just got an iPhone 4, when I plugged it into my PC, it created a new device within the library I had set up for my iPod. I don't plan on using my iPod anymore, but I get the impression I could use both devices with the same library. Could I do the same with the 2 iPhones?
Where I get confused is when it comes to sharing music, and the fact that we have 3 directories now (the original iTunes directory, and two iPhone directories). Currently despite having 2 libraries, all the music is stored in the original iTunes directory. When we download music in iTunes, it has been stored to the that same directory and simply added to whatever library has been open. Then we can simply add it to the other library as we please. But what happens when we download Apps and music directly to our phones...I presume when synched to the PC, they'd get stored in the directory specific to that device, and cannot be shared?
Bottom line is I'd like all music to be available to either iPhone, but would also like to ensure it is all stored in the same directory.

Answer 1

What is really strange to me is the Apple licensing. I spoke with one developer about this once and here is what he told me:
You can authorize up to 5 computers with your iTunes store ID. Any of those 5 computers can sync an app onto any of the devices that they manage syncing for, and it is perfectly legit with Apple. Due to the Apple developer agreements, he can not do anything to prevent that in his code.
My wife and I each have iPhone and iPod Touch devices. We each have our own iTunes store ID's (because we didn't know better at the time) so we authenticate both computers to both accounts and we can share our music & app purchases "freely" between our 4 devices. We each could authorize up to 3 more PC's with our accounts and allow more people to share our purchases (if we trust them not to purchase things using our accounts) but we don't feel that is the correct way to treat the app developers, so we don't do that. In fact, there at least one app we have liked so much, we both spent the $7.99 to purchase even though we didn't need to.