After a prolonged beta, Steam Family Sharing is now available across all clients. Being called “Family” sharing, you would have to assume it is intended to be used in the same household. In fact, that’s how it works – to authorize a user, they must first log into Steam on your local PC.
However Valve has often suggested this would be used for family and friends. In fact, they say so on the Family Sharing community page announcement:
Steam Family Sharing allows friends and family members to play one another’s games while earning their own Steam achievements and saving their own game progress to the Steam cloud.
Once authorized by the lender, family members on shared computers may access, download and play a lender’s library of Steam games.
So if you have a friend you want to share libraries with, you’re either going to have to visit their home, give them your password, or do a remote desktop session to log in and out of their Steam client.
This is obviously less convenient than simply sharing your library to them, and I’m not quite sure why they did it this way.
In any case, the feature is out, so give it a try! For more details, check out their Family Sharing page.