Just reading Marketingpilgrim's post on Libraries Turn Down Search Engines go with Nonprofit and read this as a major blow against Google Books; the news was covered in the International Herald Tribune in an article about the U.S. Library of Congress introduces plans for world digital collection:

"…The Library of Congress also signed an agreement with UNESCO in Paris to move ahead with their World Digital Library project, which is still in its testing phase and will not be available for public use until next year.

But other national libraries appear poised to cooperate in the venture, which is modeled after the Library of Congress's vast American Memory project that has posted millions of original, historical items on the Web, including Abraham Lincoln's Gettysburg Address."

On the other hand, the World Digital Project is connected with Google Print:

Above: A screen from the prototype of the World Digital Library, set to go online next year according to IHT.

MarketingPilgrim has a much more clear summary on what just happened with public online digital libraries:

"…Research Libraries have turned down Google and Microsoft’s offers to digitize their book collection. They instead agreed to let a nonprofit distribute their content. The libraries didn’t like the restrictions that going with Google or a commercial organization may place on their collections. They instead signed on with the Open Content Alliance, a nonprofit organization that will keep the information more accessible. The organization has more than 80 libraries and research institutions, and focuses on works that are out of copyright.

Google restricts what libraries can do with the digital content - including only letting them access the collection through Google search. They also restrict how much of the content can be downloaded. The libraries however don’t have to grant Google exclusive rights to scan books.

The New York Public Library, and other libraries at the University of Michigan, Harvard, Stanford and Oxford have agreed to Google’s terms. From those libraries Google expects to scan 15 million books."

So, it's a mixed bag, with some of the bigger cities public libraries, like New York Public Library (where I live) going with Google Books … in fact, I was at the event earlier this year at the New York Public Library called Google UnBound - where the announcement was made - it was a good conference and many influencers such as Seth Godin were present for this one day event in January.