Linked file has to be close to the library file, otherwise when you change computers it won't be able to display it.
Every time you place something into illustrator you break the link.
Replace, ignore, or cancel.
Select apply to all, replace, select the file you want.
If you change something in photoshop and you save on top of the linked file it automatically updates the illustrator file.
Links palate, window --> links shows you every link that is in the presentation.