What has happened to the libraries?

It's more like "models can be just classes", and they might be treated special (eg more easily found) if they are inside the models folder. A model *can* extend \CodeIgniter\Model, which provides a bunch of base functionality, but it doesn't have to.

Libraries & models are both loaded the same way ... $mything = new App\whereveriputit\MyWonderfulLibraryOrModel();