Changing this will only hide your Steam activity on your Steam profile. This does not include hiding the pop-up notification that others get when you launch a game; you’ll need to hide the notifications from Steam chat.

You’ll see your profile when you click View profile.

They also will not see your wishlist or games that you own. If you set your profile to “Private”, no one will be able to see your profile page, which can be bad only if you use third-party services with your Steam account. [1] X Research source

Alternatively, right-click the Steam icon in the System Tray (Windows only) and click Friends. You can also click Friends & Chat from the main Steam window if you don’t have your Friends & Chat window open. From the Friends & Chat window, click the downwards-pointing arrowhead next to your username and follow the rest of the steps.

This will only prevent others from seeing the games in your Library, not what you’ve played, or how much time you’ve played it.

Repeat these steps and click Remove from hidden to unhide the game from your library.