Library music is also referred to as 'production music' and is the name for music recorded and produced for or by music library companies who then license the music for a variety of different purposes including film, television and radio.
The copyright for library music is 100% owned by the music library company so it can be licensed to third parties without seeking the original composers permission. Library Music gives the media producer a relatively simple way of getting some music at a reasonable rate when compared to comissoning a composer to product a piece specifically for them.
You can find library music used in wide variety of places and it often appears as background or theme music on major movies and television programmes.
Check out the production music wiki page for more information.