I was excited to see that multiple libraries are supported in iTunes 7 over on Apple's iTunes 7 Overview web page. The only problem is that they don't mention how to do it, nor is it listed in the help docs that I could find.
After poking around in the prefs, menus, contextual menus, etc., it dawned on me that they are probably referring to multiple libraries iPhoto style -- i.e. you only get to use one library at a time, not have multiple libraries show up in the side bar. So I then restarted iTunes with the Option key down and voila -- it asked me to 'Choose iTunes Library' or create a new one.
It's my opionion that this is fairly useless. I still dream of a day when I can have multiple libraries that are spread across separate drives, and access them all from the sidebar. At the very least, it would be nice if we could select different locations for our music, movies, TV shows, podcasts, and audiobooks in the prefs, so we can better manage how we want our hard drive space to be used.
[robg adds: Variations on this hint were submitted by five different people -- this was the first in the queue, so it's the one I used...]
Mac OS X Hints
http://hints.macworld.com/article.php?story=20060912174429807