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People saying ebooks will "never" replace paper books, remember we are at the very beginning of this technological development. In 1995 it seemed absurd that the Web would replace printed news or become the main way to acquire music; today these are facts of life. Display technology and the experience in general are getting better every year, while paper books pretty much reached their full potential. We're already seeing prototypes nearing Harry Potter moving newspapers - in a few years these and better will be household items. In a few short years, today's e-readers would look like the huge, clunky 80s mobile phones that seemed like they would never catch on.
Digital distribution has always managed to replace analogue, physical distribution because it can always deliver better experience for a lower price. Websites replaced printed newspapers; CDs replaced vinyl, and were replaced with MP3; DVDs are being replaced with streaming media.
Paper books will probably still exist as a novelty item, like vinyl records today. A best-seller might have a limited edition printed in its entirety, word for word, on sheets of paper bound together, and people who really like the book would buy it and display it cover-on on a shelf along with the 3-4 other paper books they collected.
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