Note that not all will be getting the service right away. Also, not all of the 11 thousand libraries mentioned in the press release actually support ebooks; some are like my local library (which only has audiobooks). But whne they do, it will be offered as an additional service at no charge to the libraries.
I found an ongoing discussion over on MobileRead this evening where several Kindle owners are trying (and succeeding) to download ebooks from their libraries. Several have reported seeing Kindle ebooks listed and I have one report of someone actually downloading an ebook to their Kindle.
The Kindle hasn't gotten a firmware update recently, so this would suggest that there might be some unseen conversion going on to change the Epub/PDF to Kindle, and then wrap the ebook in the expiring DRM. Edit: On the other hand, one commenter pointed out that he doesn't think the conversion is happening, and he could be right. Amazon might be serving up the relevant Kindle file from their own catalog.
Update: The commenter also made me catch something I had missed. There are thousands of Kindle ebooks in each library system. I seriously doubt that they had the funds to buy all those new ebooks, so they must be using the existing license to cover for the Kindle copy when it is loaned. That was one of the details hinted at back in April and it's good to see it confirmed.
Update: The Kindle is also spuuposed to have a new firmware update, v3.3, which enables the new service. It's not avaialble yet but some people in the Seattle area report that they got it as an over-the-air update.
Neither Amazon nor OverDrive have announced anything, and in fact I'm still waiting to hear back from my contacts at Overdrive. But I do know that Amazon's help pages now refer to the library ebooks as a current feature, and OverDrive already list the Kindle as having beta support. The service is indeed live.
You can see proof of the new support on the website for the King County Library System. Their website promises that the new support is up and running right now. The other library is the Seattle Public Library.
So this news isn't as great as you being able to download the library ebooks today, but it's still a big deal. It means that fairly soon you will be able to download ebooks from any of OverDrive's 11 thousand plus partner libraries in the US and read them on your Kindle. According to Overdrive, all 3 generations of the Kindle are supported (see the screen shot above). Unfortunately, you'll need a wifi equipped model for direct downloads; you cannot download a Kindle library ebook over 3G (no one wants to pay the data cost). Go dig out that USB cable; you'll need it. BTW, if you check with Amazon, all the apps are supported too.
If you really want library ebooks on your Kindle, I would suggest that you go ask your local OverDrive library partner. They can then bug Overdrive about the new features.
P.S. I will add an update here when I hear back from Overdrive.