Recent news announcements state that the AAP and Google have settled their lawsuit. Essentially this is a formality rather than an actual change in status between Google and the publishers. As you probably recall, the AAP engaged in a lawsuit against Google, in partnership with the Author's Guild, in 2005, and five specific publishers were named in that suit. Since then the lawsuit has gone through two failed attempts to settle and a massive number of pages of legal parrying. Meanwhile, the publishers realized that Google provided them with a new sales opportunity and about 40,000 of them have entered into agreements with Google in which the publisher provides (or allows Google to provide) a digital copy of the book which then can be sold as a Google eBook. Each contract specifies the amount of the book that potential buyers can browse. This browsing is designed to prevent users from satisfying their needs without a purchase: although up to 20% of a digital book may be browsable, Google denies access to sequences of more than 9 pages in a row.
When the Author's Guild revived their suit against Google in late 2011, the AAP was notably absent from the list of plaintiffs. By then the publishers had made a satisfactory agreement with Google and had no interest in suing their business partner. This current settlement appears to be a pro forma legal action to terminate the previous lawsuit, and, as far as I can tell, makes no change to the current status of the business relationship between Google and publishers.
There is one question that remains which is what this means in terms of copyright, if anything. The contractual arrangements between Google and the publishers are standard business agreements which the publishers engage in as representatives of the rights holder through their contract with that rights holder. Sometimes the publisher also holds the copyright, but that isn't the salient point here. So unless I am missing something, this agreement has absolutely no effect on the questions of copyright and digitization that some of us have been so eager to hear about. It's just business as usual.
[After-note: Some authors and journalists question the settlement and want details made public.]