Can I keep my iTunes library on an external drive?

Question

My main computer is a MacBook Pro that's running out of space, mostly due to my iTunes library, especially the TV shows.

I have a few questions all related to solving this problem.

First the most basic: where is the iTunes library directory? What is its filesystem location?

If I move my library from the laptop and to an external USB-connected drive, will my music and TV shows still play?

And here's the tricky part: I'd like to keep some of my music on the local drive so I can actually listen to it when I'm out and don't have the external drive with me. Is there a way to do that?

I don't need to preserve ratings or play counts.

Any help would be greatly appreciated. Thanks!