Directory tree of a typical Android project (at least those created by the "android create project" command) looks like this:
As you may have seen the directory structure of countless J2SE projects, there is a directory to store the 3rd party class libraries of the project. Under the "lib" directory, you can place your Java class libraries in JAR format and they will be added to the classpath when the Android application is running.
Or will they? If you remember the APK format, there is no such thing as directory for libs in JAR format, particularly because the Dalvik VM is simply not able to execute ordinary Java class files in those JARs. You can find JARs on the device but these JARs contain class files in DEX format (Dalvik VM's class file format) inside so the extension of these files is misleading. Then where are those JARs from the lib directory that we "added to the classpath"?
You might have guessed it: these JARs are unpacked, processed by the dx tool just like the classes under the src directory and are placed into the same classes.dex file where the application resides. One application is one DEX file and JARs containing Java class files are not "added to the classpath", they are converted into DEX format and added to the DEX file of the application. Unlike in OSGi, an Android installable package cannot share code with other system components, only services.