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Have a look at Task C-4: Installing PeopleSoft Application PeopleBooks of the PeopleTools installation manual.
This describes in detail how to
Merge PeopleSoft Application PeopleBooks with PeopleTools PeopleBooks.
This option allows the application to perform context sensitive search against multiple PeopleBooks with one URL (for example, PeopleSoft PeopleTools 8.52 and Human Capital Management 9.1).
+• Install PeopleSoft Application PeopleBooks to their own folder.+
This option allows the application to perform context sensitive search against only one PeopleBook (for example: Human Capital Management 9.1).
or choose to use the hosted PeopleBooks, no installation required what so ever