How the Preprocessor Finds Header Files

It is up to the given C implementation to define where the preprocessor searches for files specified in #include directives. Whether filenames are case-sensitive is also implementation-dependent. For files specified between angle brackets, the preprocessor usually searches in certain system directories, such as /usr/local/include and /usr/include on Unix systems, for example.

For files specified in quotation marks ("filename"), the preprocessor usually looks in the current directory first, which is typically the directory containing the program's other source files. If such a file is not found in the current directory, the preprocessor searches the system include directories as well. A filename may contain a directory path. If so, the preprocessor looks for the file only in the specified directory.

You can always specify your own search path for #include directives, either by using an appropriate command-line option in running the compiler, or by adding search paths to the contents of an environment variable, often named INCLUDE. Consult your compiler's documentation.

Source: C in a Nutshell - O'Reilly Media