Book

Books are crafted from paper and currently serve no gameplay purpose except in the creation of the decorative bookshelf blocks. Books and paper can naturally occur in chests, inside strongholds.

Though it hasn't been confirmed yet, it has been mentioned that with the new code Notch made for the maps, he will be able to, in future updates, make books that players can type in and share with other players. The same thing can apply to custom paintings.

Usage
Currently the only use for books is to make bookshelves and enchantment tables. Notch has stated that in the future he might add other uses and allow words to be put in.

Crafting
Books are crafted from three paper sheets in a vertical column.

As a Crafting Material
Books can be combined with Wooden Planks to craft bookshelf blocks:

Or combined with Obsidian blocks and Diamonds to craft an Enchantment Table:

Future uses
According to Notch, there may be practical uses for books. However, it is unknown when this is planned to be released.

They will be usable for enchantments in Beta version 1.9.