This report explores the world of e-books and libraries, where libraries fit into these book-consumption patterns of Americans, when people choose to borrow their books and when they choose to buy books. It examines the potential frustrations e-book borrowers can encounter when checking out digital titles, such as long wait lists and compatibility issues. Finally, it looks at non-e-book-borrower interest in various library services, such as preloaded e-readers or instruction on downloading e-books. To understand the place e-reading, e-books, and libraries have in Americans' evolving reading habits, the Bill & Melinda Gates Foundation has given the Pew Internet Project a grant to study this shifting digital terrain. Libraries have traditionally played a key role in the civic and social life of their communities, and this work is aimed at understanding the way that changes in consumer behavior and library offerings might affect that unique relationship between libraries and communities. Findings include: (1) 12% of readers of e-books borrowed an e-book from the library in the past year. But a majority of Americans do not know that this service is provided by their local library; (2) E-book borrowers appreciate the selection of e-books at their local library, but they often encounter wait lists, unavailable titles, or incompatible file formats; (3) Many Americans would like to learn more about borrowing e-books; (4) 58% of Americans have a library card, and 69% say that their local library is important to them and their family; (5) Library card holders are more than twice as likely to have bought their most recent book than to have borrowed it from a library. Many e-book borrowers purchase e-books, too; (6) Library card holders use more technology, and they report that they read more books; and (7) Leading-edge librarians and patrons say that the advent of e-books has produced a major transformation in book searching and borrowing at libraries. (Contains 66 footnotes.)