That's not quite accurate TheBao
When you add the MTransfer component to the Remote Components folders of your local machine, the DLL is copied across the network to your local machine. The dll will be copied to a subdirectory with the same name as the Package on the MTS Server.
Then the local machine system registry is updated with information from the system registry on the MTS Server.
So the DLL is now physically on your local machine, and therefore runs on your local machine
Using Library or Server packages just refers to whether the package will run in the same process:(from the official propaganda)
A Library package runs in the process of the client that creates it. This option is only available for clients on the computer on which the package is being installed and configured. Note that Library packages offer no component tracking, role checking, or process isolation.
A server package runs in its own process on the local computer. Server packages support role-based security, resource sharing, process isolation, and process management (such as package tracking).
I don't know personally of anyone ever setting up an MTS package to be a library package.