The Google Books project is perhaps not that relevant for our field because we almost only refer to recent (and thus copyrighted) books which are only available in truncated form. But otherwise the project is potentially fantastic. Imagine having all books online that have published in the 500 years from the dawn of printing to the near present. Searchable!
But the owls are not necessarily what they seem. Robert Townsend, assistant director at the American Historical Association has tried to use Google Books for his own research over an extended period of time and has now written a scathing critique of the project in a recent post on the AHA blog. Poor scan quality, faulty metadata and a truncated public domain are some of the problems according to Townsend. The comments to his critical article give a fairly balanced view of the pros and cons of the Google Books project.
My personal experience is that Google Books is a marvelous search engine for browsing the literature — but when you’ve found the source you should quote from the original, not from Google.