You know, I wasn't sure myself so I had to look:
Lending Kindle Books
The short answer is -- if the rights holder has enabled it, a Kindle book can be "loaned once for a period of 14 days". Definitely a downside of ebooks, though of course with all the public domain stuff out there it's not an issue. In fact, the opposite -- you can turn someone on to a book without losing your copy.
It'll be interesting to see how things develop. Right now, most publishers are still pricing ebooks on a par with or even more than physical books, but there's a lot of downward pressure on that from various directions, and a lot of controversy in the publishing community about the appropriate price for an ebook. Ultimately I think something like what happened with music is going to happen here -- they're going to have to price books low enough (plus add whatever other sort of value, like social networking) so that it's more convenient to just buy it than to pirate it.