They won't replace books, but they're great little machines actually.
And sorry, but **** an app on a phone; reading more than an occasional Facebook post on those things is awful. The whole point of an e-reader is to replicate the look of an actual book page, rather than have some screen glaring in your face for a prolonged period of time.
I was "against" getting one for ages and being a bit of a traditionalist/snob when it came to books, but it's the best thing I've bought in ages. Going on the Kindle:
1. The battery lasts for weeks at a time, and that's with continual use. You'd never get that if you used a phone for the same thing.
2. It's really convenient, especially when travelling. Books are heavy; airlines are bastards. If you're away for a while, or even if you're just close to finishing a book and want to pack a second one, then they're brilliant.
3. Built in dictionary. Sounds daft, but if you're reading and you don't understand a word (might be an old book for example), you just highlight it and instantly get the definition.
4. Fantastic screen FOR READING. There's no glare at all, and you can adjust text size to suit you. No, you can't watch Youtube on it, but it's perfect for what it's designed for.
5. Instant books, which are usually cheaper than the hard copy. There's also plenty of places to download them "free" in the same way as films or TV shows.
6. Free internet access with the 3G. There's a built in web browser, and while it's not great for this (smart phones are way better), in an "emergency" abroad when you don't want to pay ridiculous data roaming charges, it's a more than decent alternative.
I could go on, but basically, if you don't read much then you've got absolutely no use for one. If you're not an X-Factor addicted ignoramous however, I couldn't recommend them highly enough.
Anyway, back to the question. I can't see them replacing books to be honest, at least not for a long time. They're great for novels, but not so much for "flicking through" a book. They handle images fairly well, but if a book was picture/diagram heavy, I wouldn't use an e-reader for it. For example, you can get guide books on them, which is just daft as those are the kind of books that you're constantly flicking from page to page with.
I'll still go book "shopping"; it's just that now I tend to find what I want, make a note of it and download it later.