There are ten Sapphire Books of Knowledge. In the early days of Pnyx, these books belonged to its library. However, over time, all ten volumes were lost. [Selinus dialogue]
It is unknown exactly when the Sapphire books were written or who wrote them [Anisa dialogue]. The books seem to be valuable among mages in Cythera.
The player has the opportunity to find and return the books to the Pnyx librarian, in return for access to higher-level magical spells.
The Player's Task Edit
Magical spells in Pnyx are divided into eight degrees. Beginning students (as well as the player, after he/she has received basic instruction by Lindus) have access to the first three degrees of spells, which are located in the main hall of the Pnyx library. The fourth through eighth degrees each have their own hall which are kept magically locked with password protection. The librarian, Selinus, decides when students are worthy to advance to higher degrees (which usually takes years of study) and gives out the passwords. [Mage dialogue]
Selinus makes an exception for the player, and is willing to give out passwords in exchange Sapphire books. For each two books the player returns, Selinus will give out a password. The player can any number of the books at a time and in any order. If the player somehow duplicates the books, it is possible to return more than 10 books to Selinus, which tends to cause errors in the game.
The magically locked doors guarding the fourth through eighth degree halls will open when the player types in the correct password, but only if that password has been given by Selinus. Guessing the password or remembering it from a previous playthrough has no effect unless Selinus has received the proper number of Sapphire books.
The Sapphire Book of the Crown is in Alaric's study. It is unknown how Alaric came to be in possession of it, but Selinus is aware that he has it.
The Sapphire Book of Understanding is in an empty room in Pnyx. Selinus knew that a student had this book years ago, so it's surprising that he never checked the empty dorm rooms.
The Sapphire Book of Mercy is in Itanos's study. Itanos stole the book from the Pnyx library, but he's willing to give it back if it's not at all inconvient for him (that is, if the player asks for it when he's hanging out in his study, late in the evening).
Prusa carries the Sapphire Book of Beauty. No one seems to be aware that she has it, and it's unknown how she got it. She is an insane magess who lives at the source of River Styx and can be found there after asking Itanos about her. Some players have found it frustrating to get this book, because it is not possible to ask her for it and her monologues are randomly generated when one talks to her. However, the random monologues have six slight variations which she cycles through every six days. It is possible to get the Book of Beauty on the 1st, 7th, or 13th (etc) days of the game.
The Sapphire Book of Victory is buried north of Catamarca, in the only sandy bit of coastline between Catamarca and Odemia. According to Anisa, the book was in possession of an unnamed ancestor of House Nicander who for unknown reasons threw it into the ocean off of Odemia one day.
The Sapphire Book of Splendor is under Polydamas's bed in Catamarca. It supposedly belonged to a judge of Catamarca long ago, but was left behind to his majordomo, who passed it on to his successor, Polydamas. [Anisa dialogue, Polydamous dialogue]
Anisa finds the story of what happened to the Book of Foundation to be the most interesting story of all the sapphire books. The person who traded the book to the Seldane may be a long-dead character who is never mentioned in the game. However, there have been some theories about characters mentioned in the game:
-Diones (known to be an elder of Pnyx in the early 200s, may have possessed the Seldane "strange device" and was involved in the investigation of the Cult of Scylla)
-Chrysothemis (Alaric's mother, who apparently married a half-Seldane/half-Undine)
-Tavara (possibly an elder of Pnyx before he left to lead Abydos, he was aware of the Seldane and of the elemental battle going on between them and the Undine)
-Neleneus (the savant who made three famous prophecies in Cythera and may have lived around 170 A.T.)
Although Anisa says the book was traded for knowledge, some have speculated that it was in fact traded for the Seldane strange device (a magical device that can open the doors to the chambers where the mystic helmet, armour, and spear are kept). This would explain how the humans got ahold of the strange device. Additionally, the Seldane in possession of the book, Unhayt, is the "doorkeeper of the Ayrit" - perhaps that had to do with the doors to the mystic items.
The Book of the Kingdom is in the Tyrant's Castle in Cademia. It is in a locked room that is layered with dust and doesn't seem to be used anymore. Berossus (the judge of Cademia who now lives in that castle) may not be aware that the book is in there.