I initially thought it was exclusively for official libraries like the support library. However any time I add a custom JAR using the "Add to build path" menu item, it automatically shows up in both "Referenced Libraries" and "Android Private Libraries". One of these is redundant since there is no point in exporting both at build time. Additionally, "Android Private Libraries" cannot be modified so I can't (easily) add java doc or source paths. Not to mention it just seems wrong that a custom JAR is in "Android Private Libraries".
I cannot delete the entry from "Android Private Libraries" to use only "Referenced Libraries" either.