Storing a library on an external drive
You can store an iPhoto library on an external or removable hard drive just the same as you can on your computer's built-in hard drive. To create a new library, follow the normal procedure for creating a new library, and choose the external drive as the location for the library. If you have an existing library that you would like to store on your external drive, use the "Duplicate Library" command in the File menu. You will be given a choice of where to duplicate the library to, at which point you can choose the external hard drive that you'd like to copy the library to. Once you've created or copied your library on the external drive, you can then open it up just like any other iPhoto library.
Apple recommends that you store your iPhoto library on a Mac formatted drive, and notes specifically that issues can occur when storing the library on a FAT32 drive (used by DOS/Windows). In practice, this advice also applies to ExFAT and NTFS formatted drives. iPhoto Library Manager will warn you when adding a library that’s already on a drive of one of these formats, and will refuse to create a new library on such a drive. If you already have a library on a non-Mac formatted drive, it’s recommended that you either copy it over to another drive that is already Mac formatted, or copy it off of the current drive, erase and reformat the drive to be Mac formatted, then copy the library back on.