First off, here's the documentation resource: http://www.mathworks.com/help/simulink/ug/working-with-library-links.html
When you drag a library block into a model, you can't directly modify it inside that model. The idea is that the block should be modified in the library, and not in the model that references the library.
If you right-click the block in your model, however, you have the option to disable the link. When you do this, you are now able to modify the block in your model.
When you make changes to a disabled library block, it then becomes different from the original library block. If you select resolve, you can choose to push your local changes to the library or restore the block to how it originally was in the library.
Alternatively, you can break the link to a disabled block, which completely disconnects it from the library it originally came from. It is now a standalone block that has nothing to do with the library.
- Sebastian
