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The recommendations are downloaded to the reader from the desktop (or through wifi) from the Kobo web site servers. When you log into the Kobo web site you'll see the recommendations in the upper carousel.
The carousel gets populated by your actions of the books you buy or search or select on the Kobo web site. Over time, the carousel starts to get populated, and you can mouse-over any book and select whether you like the book or not.
Eventually the books there should reflect the type of material you like (although you'll see a lot of stuff you wonder how it got there).
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