Earlier in October the eBook library system began. My town library is part of a regional coop that picks titles via Overdrive eBooks (in addition to earlier services in downloadable audiobooks) on a quarterly basis. They have about 400 fiction and non-fiction titles in eBook form. Once you login and fill your wishlist, you can do the 14 day borrowing for a few titles at a time.
The final step takes you to your amazon login page since the administration of the lending period is handled there, including a friendly warning about the loan period ending in 3 days (with the convenient button to buy). To renew the book for another loan period you must go through Overdrive once more, though.
Here are the details, Public Library Books For Kindle Help Page
The other day I was at a high school library and estimated the bookshelves behind my Kindle in this photo held about 600 titles. And the 4gb memory of the device should handle plus or minus 1,000. It boggles the mind to think of so much in such a slim package!
I've experimented with audiobooks, too. I prefer to drop the mp3 into the Audible folder so that the title shows on the Home screen and defaults to the player controls there (the Music mp3 folder uses a simpler player with fewer user controls). I found a foreign language one in the free section of Amazon to try out, too. Project Gutenberg has several foreign language text titles, but also a few audio books available; of course these are so large that wifi connectivity is needed. But using http://bit.ly/gutmagic lets you browse or search from the kindle before downloading favorites of any medium, text or audio.
Finally, I have experimented with placing various filetypes online so that a kindle user can browse there and click a link to bring the dialog box "do you want to download this file now?" This would allow me to 'publish' things for kindle users on wifi, for instance. TXT and AZW (and mobi and prc) all seem to work, but PDF does not. And JPG (and the other supported image filetypes) and HTML will simply display on-screen, not cause the dialog box to pop up.