See here: Search Path
Summary:
#include <stdio.h>
When the include file is in brackets the preprocessor first searches in paths specified via the -I flag. Then it searches the standard include paths (see the above link, and use the -v flag to test on your system).
#include "myFile.h"
When the include file is in quotes the preprocessor first searches in the current directory, then paths specified by -iquote, then -I paths, then the standard paths.
-nostdinc can be used to prevent the preprocessor from searching the standard paths at all.
Environment variables can also be used to add search paths.
When compiling if you use the -v flag you can see the search paths used.