When iTunes creates an iTunes library, does it copy all of the files?

Or does it just create a pathway to those files? I remember waaaaaaaay back when I tried putting my library into iTunes, it physically copied every single file and filled up my harddrive. That was years ago, granted. But I'm still gunshy about it happening again. I would hope they've fixed it by now.
Also, will iTunes be able to understand where my files are if they're located on an external harddrive? I keep all of my music on a WD Passport external drive and I plug and unplug it a lot. Will it be able to keep up with that these days?
Thanks.

It depends on how you have iTunes' preferences set. If you just use the default preferences, iTunes will copy any tracks you add into its own library folders. If you want to keep your tracks on your external drive, just turn off the "copy files to iTunes Music folder when adding to library" the iTunes -> Advanced preferences. You will also want to turn off the "Keep iTunes Music folder organized" option in the same preference. Then when you use the Add To Library command, iTunes will link to the tracks on your external drive rather than copying them to the internal.
You'll want to set the location of the iTunes Music folder in that same preference pane to your external drive if you want future purchases from the iTunes Store and imports from CD to be stored on your external as well.
Regards.

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