That all makes sense to me, and I use Google Books a lot, whatever my misgivings about Google in general (and I have many).

But what I still find hard to stomach is the notice that the put on page zero of every PDF of books, even those in the public domain:

Google is proud to partner with libraries to digitize public
domain materials and make them widely accessible. Public domain
books belong to the public and we are merely their custodians.
Nevertheless, this work is expensive, so in order to keep
providing this resource, we have taken steps to prevent abuse
by commercial parties, including placing technical restrictions
on automated querying.

Doesn’t this read to you like a kind of hostage-taking of this material? What they’re saying is, “We paid a lot of money to digitize this material. Therefore, even though it ‘belongs’ to you, the public, we designate ourselves as simultaneously (a) distinct from the public and (b) non-abusive. So, you can use this thing that ‘belongs’ to you, but you may do so according to our rules. Otherwise we will take it back from you.”

Note that they make no statement that in the even that they do discontinue the service, that they would also cease to use the materials for their own internal purposes. To me, these statements together do not amount to testimony that Google believes these documents are “public”.

We also ask that you:
+ Make non-commercial use of the files
We designed Google Book Search for use by individuals, and we
request that you use these files for personal, non-commercial
purposes.

But they can, since they have more money than individuals. They didn’t “design” it for individuals. They decided that it was not for their competitors. It’s a clear statement that they believe they have unique commercial rights in this “free” content.

+ Refrain from automated querying
Do not send automated queries
of any sort to Google’s system: If you are conducting research
on machine translation, optical character recognition or other
areas where access to a large amount of text is helpful, please
contact us. We encourage the use of public domain materials for
these purposes and may be able to help.

Whether they actually do that, I don’t know.

+ Maintain attribution
The Google “watermark” you see on each
file is essential for informing people about this project and
helping them find additional materials through Google Book
Search. Please do not remove it.

Or?

Relevant: http://www.youtube.com/watch?v=BAaoHX9KiWY

+ Keep it legal
Whatever your use, remember that you are
responsible for ensuring that what you are doing is legal. Do
not assume that just because we believe a book is in the public
domain for users in the United States, that the work is also
in the public domain for users in other countries. Whether a
book is still in copyright varies from country to country, and
we can’t offer guidance on whether any specific use of any
specific book is allowed. Please do not assume that a book’s
appearance in Google Book Search means it can be used in any
manner anywhere in the world. Copyright infringement liability
can be quite severe.

And, although we’ve reserved unique rights for ourselves, implicitly excluding you from a wide array of uses of material that “belongs” to you, we also transfer liability in using “your” things to you. But don’t remove our watermark, or else.

It’s just so much backstabbing doubletalk.