This is good news for writers that are seeking to expand their readership. I have mentioned before that many authors seek to give away some of their e-books and they employ several strategies like posting them for free on B&N via Smashwords so that Amazon will match the price, or even posting their work on book pirating websites.
Therefore making available Kindle e-books for lending by libraries is a plus. However there is one caveat. Libraries are likely to favor the e-books of authors with some name recognition. So you see, there is no free lunch here. The road to the top is still steep and slippery but as we get closer initiatives like these will make it easier.