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Wired has a multimedia presentation on the mechanics of the Internet Archive Book-Scanning project.
"While Google has made headlines over the last two years for scanning thousands of copyrighted works for its Book Search project, the Internet Archive is quietly digitizing around 1,000 public domain titles every day.
The process is labor-intensive, but surprisingly efficient: The text collection on archive.org is the world's largest online collection of free books, with nearly 350,000 titles and growing."