Basically Amazon sets aside $6 million, the KDP Select fund.
If an author makes their book exclusive to Kindle for at least 90 days then it may go into the lending library, and you can earn part of this fund.
Sounds like it's a way to lock down indies, though oddly I can see this being too easy – the majority of my sales are through Kindle and I promote platform-independent.
But how will people react? Well I confess I got an "oooh" reaction out of this myself – then realized there's no guarantee I'd get into the lending library anyway.
Still I think it shows Amazon is thinking long tail – they want to lock down authors, and they want to be a full-service platform. This is important with eBooks, since though the Kindle may be easy, a lot of people are publishing in PDF and ePub anyway.
More as we find it.