A planned, unfinished extraction of Audacity's sound functions into a library (which has no GUI) that could be embedded within other programs, also available for scripting.
LibAudacity was replaced by Mezzo, which also remains unfinished. In many ways the goal of both libraries was the same, to get a cleaner separation between audio processing code and GUI. Libaudacity was mainly a concept rather than actual code, whilst Mezzo actually led to some new code.
Nowadays most of the core developers believe that it is more productive to work directly on Audacity to achieve the LibAudacity/Mezzo goal, and there are no current plans to revive either library. The scripting feature may already be providing an incremental way of separating GUI functions from pure audio processing functions. The use of 'Artist' classes like TrackArtist is also helping.