The "Netflix for books" is, and has long been, libraries. And yes, almost all of them have an ebook program in addition to their huge supply of paper books.
Frankly, the e-book programs for the last few libraries I've been around have been awful. Hard to use, one was Windows only (we don't have Windows at home), selection of really lousy books... Basically, anything else that shows up presents a compelling alternative to the library ebook systems I've seen.
Our local libraries recently started an ebook program. However, copyright restrictions mean they aren't allowed to loan a single 'copy' out to more than one person at once. With the relatively small number of ebook copies available compared to the number of library users, last time I checked there was a long waiting list for most books. Perhaps ironically, it is quicker to go to the library and borrow a paper copy. (The irony being that one of the advantages of ebooks over paper books is that you don't have to wait for them to be delivered)
I suspect that as e-books become more popular, libraries are going to license them in larger quantities. They're a big cost saver for libraries since they take no space to store, no labor to re-shelve and can't be damaged or stolen.
The trouble with this is that without legislation in place to control the pricing of e-books as sold to libraries, e-book publishers use a number of tricks, from significantly higher pricing to making each license only valid for a set number of borrows before another license has to be bought, which negates the "they can't be damaged" benefit.
There's still a lot of bullshit licensing, like ebooks that can only be checked out a finite number of times, in order to reflect the average shelf life of physical books.
Is Overdrive (the library ebook system I see everywhere) intentionally painful to use (to deter users), or just horribly implemented?
It isn't great. But many libraries have rolled out a new version of Overdrive that's noticably better (even if it's the same implemention, it's at least less confusing). For example, NYPL New York doesn't have it yet, but Los Angeles Public Library does: http://lapl.lib.overdrive.com/
I agree with the other responses that library ebook programs are hamstrung by the fact that they can only lend out as many copies as they "own". So if you want a popular book in ebook form, good luck. Might as well just buy it considering how long the wait is.