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Since we are clearly speculating based on limited information, I'll have a go. It seems clear from the article that these books will be available on ereaders. Hopefully these will be in some format (currently ePub or PDF) that we are familiar with. These are the other ways that I can think of making this work (and what I think of them):
1 - Web only. Since only some readers have network connectivity and browsers, and many of them are not good quality, this seems like a non-starter.
2 - Google cooks up their own eBook format and creates a massive hack so that they run on current readers. Very dodgy, doesn't seem likely to me.
3 - Google cooks up their own eBook format and reader (maybe with a partner) like Amazon. Could happen. Doesn't seem like Google's style, but they do have the Android operating system, so who knows?
4 - Google does "caching" in ePub format, but with "bits of books" and not the whole thing. It seems like they would need to use an existing format for ereaders, say ePub for example. The format is really a container, a wrapper around whatever you put in there, be it a sentence, a book, a chapter, or an encyclopedia. It shouldn't be too hard to generate ePub books on the fly. Google could use the format to let you download parts of a book to read when you are offline, managed by some sort of software (maybe even Google Gears). This seems like a lot of work for no clear advantage, but maybe publishers will be happier if you can't get the whole thing in one place. This would be pretty crappy, but it seems possible.
5 - A good ol' eBook, in one of several formats.
Hopefully they will go straight to 5, but if they don't, I doubt the project will be anything more than a niche one. If they can provide access to texts that are not available elsewhere, it will have some draw. But people like their books (as this thread shows clearly).
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