OK - here's the dope. I'm pretty annoyed with Amazon about not bothering to update their Kindle for Mac application for Lion - they have had pre-release OS-X 1.7 for months to test with, and didn't get around to it.
The very old 1.2.3 version that you can install from the Apple App Store for free does function - you can register it, and can retrieve the Amazon books you paid for.
However, the stupid program tries to hide the books, which newer versions gave up months ago. They are located in a directory which is hidden on OS-X 1.7 Lion. It is yourname/Library/Application Support/Kindle/My Kindle Content/
You will find the books there in .mobi (proprietary) format.
You can unhide the /Library directory using the command described here:
http://hints.macworld.com/article.ph...10704093233123
Once you can locate the book files, you can back them up without needing Amazon's approval, or import them into Calibre for library management or conversion for use with other reader devices...