How do I use libraries / includes in C++?

Question

Is there a difference between #include and libraries? Or can you just include libraries in your application? Another thing I want to know is if I want to distribute my application how and where do I put the files that I've included in my program? Am I allowed to put the libraries and header files in the same folder as the .cpp files?

This confusion arose when I was trying to figure out how to install the SFML library into Dev-C++, now before you tell me that Dev is old and I should change, I won't because it works fine for me. I don't like Visual because it's a little disorienting, I just want something simple, like Dev-C++. If I have a folder called libraries in with my source files can I just do

#include <libraries/something.h>?