Ella y yo nos queremos = She and I love each other. A literal translation would be "She and I want each other" which has a much more sexual, lustful, meaning than "love each other." Does the same distinction exist in Spanish?
Querer in this situation means to love. The sexual, lustful, meaning would be "nos deseamos". Desear: 3. tr. Sentir apetencia sexual hacia alguien. Examples of usage of 'querer': Quiero una moto. -> I want a motorcicle. Quiero ese gato -> I want that cat. Quiero a mi gato -> I love my cat. Quiero a mi madre -> I love my mother. Nos queremos -> We love each other. Te quiero -> I love you. I hope this helps!