You won’t have to reinstall any of your existing games to take advantage of this update. You can enable the new installation and game management features by right-clicking on games in the Xbox app and selecting manage. Any future games you install will give you the option of putting them in a specific folder.
These changes will also allow you to mod more games from the Windows Store, making the Xbox app feel a lot more like Steam. The new Xbox app update is now available in the Windows Store.