So... here is the email I sent to the Philly library:
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With the new Penguin restrictions on Kindle ebooks, borrowed ebooks must be transferred to the Kindle device via USB. This cannot be done with the various free Kindle apps, like Kindle for PC, Kindle for iPad, etc. Thus, borrowed Penguin ebooks cannot be read on "free Kindle apps," as indicated on the Kindle version of High Fidelity. You might wish to strike the "free Kindle apps" notation from your Penguin holdings.
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...and... here is the reply I just received:
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The new Penguin regulations are new, and there has been some debate as to whether the titles would work with apps. I'm sure our vendor is aware of the issue.
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So, a basic non-answer.