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A plays B, B plays C, C plays D and D plays A. All 4 play at the same time - one person using a single library. HOWEVER, you cant play someone else's game if you already own it.
So if the game is owned by A and B, then C and D can only share from A and B, A cant share from B for that game.
There's also the issue that you cant CHOOSE which library you share from - so if C tries to share from A, D may get a "library in use" message even through B is free. There is a custom made app called SFS-Select ( https://steamcommunity.com/groups/familysharing/discussions/1/3068621701744549116/ ) that has been made to help with this.
A and B has game. C wants to play game. Shared library active with both A and B, but only shows available from A. If A plays game, and B does not, C cannot use it due to A being active. If B plays, and A does not, C can play.
Each game in the library that was owned by each A and B, only showed shared by A, but games not owned by A, and owned by B, was shown shared by B. It appears to have a priority on sharing, and cannot have the game shared by multiple party's, but by a priority (probably the one shared first based off what I was seeing).
That's what we've seen so far.
Even if another library has the game in share you cant play it if the primary library with it is in use.
Use the tool KARR™ posted above, that lets you select from which library you get a shared game if there are multiple available.