I believe smartphones will do a lot to shake up this industry as the music sharing sites and the iPod did for the music industry. I am a kindle2 owner and love it, but I recently downloaded B&N's eReader and Mobipockets eReader for my Blackberry Storm. It is quite nice, though not for my aging eyes.
However, as a teacher, I can tell you the younger generation is disconnected from dead trees and connected with smartphones. With the Kindle DX available, textbooks may soon go the way of newspapers as students demand online or digital textbooks. If the cost is substantially lower ($50-$150 per textbook now), parents and schools will rally to this cause as well.
In this age of going Green, we might find using trees to produce paperbacks a rather inefficient and ecologically unsound practice. I have nothing against paper or paperbacks, but I crave efficiency in most things I do. I sell more eBooks than paperbacks because the cost is lower and the delivery is instantaneous.
Libraries will never go the way of record stores, they will simply digitize like everything else
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