Consolidate moves files to the library that were linked in some way as far as I know. I know if you add a directory to iTunes but the files are not actually within the iTunes music folder, then consolidate will move them across. Such as if at some point in time you did not Copy files to Library when adding songs (option to turn this on & off is under Advanced in preferences). Consolidate then moves all files not in the main music library across to it.

I am aware on my old mac running OSX 10.3 & 10.4 I think iTunes was limited as to how many songs you could add at one time. However on my new intel mac under OSX 10.5 I seem to be able to re-add the entire music library back into itself. Not sure if this always applies with adding large numbers of files but did add a large number of files from an external at some point I think.