For those of you just tuning in, some background may be in order. You can find a good rundown here and a timeline here, but I'll provide it in trademark Bullet-O-Vision™ for the link-averse:
• December 2004: Google conceives the Google Print Library Project, the precursor to today's Google Book Search.
• September/October 2005: the Authors Guild of America and Association of American Publishers independently sue Google, citing copyright infringement. Google objects, citing fair use.
• August 2006 - July 2007: Over the course of a year, a bunch of university libraries announce they'll be partnering with Google in the Book Search venture.
• March 2007: Microsoft jumps on board the litigation bandwagon. This isn't surprising, since Google and Microsoft are rivals (Chrome vs. IE, Google search engine vs. Bing, &c.)
• October 2008: A settlement is reached in which Google agrees to pay $125 million to remunerate all copyright holders whose rights were infringed, cover all legal fees, and create a public Book Rights Registry. Ever since, the terms have been under negotiation, with a ruling expected next month. However, as mentioned above, there's been a bit of a setback.
The main problem, at least as far as I can see, is this: Google believes they are allowed to keep full scans of any book—even those still under copyright—in their database, so long as they only permit public access to books that are already in the public domain; most copyright holders disagree, particularly publishers who are 50% legitimately worried that permitting one private company to effectively control the majority of the world's printed word is dangerous and 50% terrified of technology in general.
My take: I am 100% in favor of Google maintaining a database of public domain works, as are, I think, most people—except possibly public libraries, who may go by the wayswide if and when e-books come to power, meaning Google + Amazon = Your Reading Experience™. (In case you couldn't tell, I really love that little "™" symbol.) However, I am not in favor of Google maintaining a database and book registry for copyrighted material for the following reasons:
• Security. Book piracy isn't really a problem yet, but once e-books are commonplace and Google's got a massive (ostensibly private) database of copyrighted material all in one place, it will, I think, be very attractive to e-pirates who don't want to pay full price for electronic books.
• Accountability. Depending on the nuts and bolts of your contract, the copyright is either in your name or your publisher's, yet Google's holding onto it without your permission. But don't worry, they'll pay you if people are accessing your copyrighted material through them.
• Destruction of competition. With everything centralized and controlled by one entity, it seems to me healthy competition (e.g. from publishers, other electronic book databases, libraries, &c) could be stifled.
Then again, I'm the cautious (some say conspiracy theorist) type, so it could all be unnecessary hand-wringing. But I know if it were my copyright and my livelihood involved, I'd be damned sure no one was exploiting my work or stealing from me while citing free exchange of information.