If Google Book Search was to come into our homes every week and demand to see our reading lists, as well as instal security cameras to monitor exactly what we read, we would protest. But this is an online, invisible invasion. There aren't going to be that many protests.
Google argues that the project is intrinsically good, and points to their reasonably strong track record at respecting the privacy of individuals—except in China. (via Should Google own the world's words?).
Looking at the way in which technology changes, this debate will be outdated in the next 20 years - with crashing server and memory costs added to strong open source softwares and database systems. But in the meantime, Microsoft and Nokia have plateaued, Yahoo is declining and Google's star continues to remain ascendant!
Google Books is a good service - and maybe competition will make it better. Or maybe competition itself will offer superior service. Add the self-publication trend, and what we may get is further fragmentation of media. More authors will depend less on established publishers.