Amazon explains the Kindle Lending Library program in more detail on their help page for the lending program.

A few main points:

• The program is only for Amazon Prime Members
• The program is only open to U.S. Kindle and Fire owners
• The books can only be read on devices, not the software apps. They cannot be read on an iPod or iPhone.
• The device must be registered to the same account as your Prime membership
• The program does not begin until Thursday, November 3, 2011.
• You can only read one book per month with no “roll-overs.”