I think this thread is only talking about keeping books of lyrics to songs, but what about the TAB for all those songs? What if you forget how to play something and need to go back to it and learn it again? There is nothing wrong with performing from sheet music, if you can sight play well enough. Lots of professional musicians do it. The question is how to store all that music, so you can find it when you need it.
In 1963-1966, I kept a loose-leaf book of all the TABs, written in pencil, to the songs I was learning, with mimeo sheets stuffed into the pockets of the binder. Boy, am I lucky I kept that book all these years! When I took up the guitar again, two Summers ago, I was able to go back to those lesson sheets and learn my old songs all over again, starting with "Freight Train". My advice, to everyone, is write down the TAB/Music to every song you learn, and keep it somewhere safe. If I could only remember how to play "Bad Dream Blues", I would be a happier man today, but, alas, I didn't write it down!
Now I collect TAB/Music from all kinds of sources, online, lesson books and videos, printed books, copies from other people, and even stuff I write out myself. I am trying to write down everything that I play, so I can go back to it, if I forget how to play it. Nowadays, I use TablEdit to write down TAB/Music and store it in the computer, but I'm NOT going to type in all that other stuff I have in books and booklets and single sheets of paper! I'd rather spend the time practicing the guitar!
I keep the bound books and booklets on a shelf, and make photocopies of the songs I'm learning, to put on my music stand or carry in my guitar case, dating them to indicate when I started learning them. When I am done with the TAB, I put it in one of those accordian files, alphabetized by song title. This way I keep the songs I know in one place and the ones I don't know in another. When the accordian file starts to bulge, I may have to get a file cabinet! I will also consider myself lucky to be able to play so many songs!
Then the question arises, how to find the TAB for a song or even know if you have it or not. Did you ever buy a CD and then get home and find that you already had that one? My solution, for my record collection was to design a Microsoft Access database, with lots of relational cross references. I can easily find all the versions of a particular song or all the songs by a particular artist or author, with just a couple of keystrokes. I think I'll add a lyrics table to the database. I can type in the lyrics, as I find them, or just a reference to the book or folder they are in.