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I have installed Tex Live 2012 in both Windows 7 (C:\texlive) and Ubuntu 12.04 (/usr/local/texlive). Inside both these folders there are two folders namely 2012 and texmf-local. My question is that if I want to install a package manually for example the acmsmall package for a particular ACM journal, where do I put the .cls and .bst files. Please note I want to user install the package. Is the folder named texmf-local my personal texmf tree or do I need to create a separate texmf tree?

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put it into /usr/local/texlive/texmf-local/tex/latex/acmsmall. For MikTeX you can create also a local texmf tree with the setup manager. After saving the files run texhash or update the file name database (MikTeX)