Files for including are first looked in include_path relative to the current working directory and then in the directory of the current script. E.g. if your include_path is libraries, current working directory is /www/, you included include/a.php and there is include "b.php" in that file, b.php is first looked in /www/libraries/ and then in /www/include/. If filename begins with ./ or ../, it is looked only in include_path relative to the current working directory.