Files you d/load are by default saved to your shared folder and hence being shared.
In LW go to Tools>Options>Sharing, click the add button and find the folder(s) you want to share and click select, then apply. The default location of your shared folder is C:\Documents and Settings\"your account name"\Shared.
It's safe to share folders in LW, just so long as you know what you're sharing. Also if the folder your sharing has any sub folders in it, they'll also be shared.
You can easily unshare any file or folder you want by going to the library and right clicking the file/folder and select "Stop Sharing File/Folder".
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Other issue: in Library under Shared Files there's nothing, but under Shared (which is the folder underneath that) there are all the songs..? Is it normal?
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The first one that says "Shared Files", is just a shortcut to the Options folder for if you want to add to your shared folders. It's normal, you can ignore it. The files that show when you click on "shared" are the ones that are in your shared folder and are the ones your sharing with the rest of the world
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