What is the future of bookselling? As much as I understand the efficiencies of Amazon, browsing through a bookstore can't be replaced by online; it's a different experience.
Medium: Moving towards digital, but physical books will remain relevant. Eventually digital might become so superior from a practical perspective that physical books will become collectors items in the sense that people will want to have some of them around for nostalgic reasons (e.g. religious texts, favorite authors). But people are programmed to hoard physical objects, so even when digital becomes superior they'll still want some books. In the mid-term you will see printing on demand in a reasonable quality distributed through and printed by local stores[1], allowing them to participate in the long tail segment instead of just stocking bestsellers.
Shopping experience: It's fun to go to a bookshop and browse, even if you're going to order the books you like from Amazon in the end. This will become something you do on a free afternoon as a form of leisure (as many of us do already). Successful shops will figure out a business model around this, focussing on the experience instead of the practicalities. For more practical purchases (e.g. "I need a book on Haskell, pronto") people will use Amazon instead.
Small players will remain active in niche markets, like selling collectible antiquarian books, where focus and specialization gives them an edge over big players like Borders or Amazon. This will mostly happen over the internet, which is a change that is already happening. A good friend of mine runs a high street antiquarian bookshop and has days where he sells for less than $20 in his brick and mortar store, but makes up for this by selling online. The main reasons for keeping the brick and mortar shop are nostalgic, as a warehouse for this inventory and as an avenue for people to come in and sell him new stock.
[1] That is if copyright holders will go along with this approach, because the publishing, movie and music industries are rackets that don't necessarily have the best interest of their customers in mind (customers as in consumers as well as resellers like bookshops and record stores).
For more on this idea, The Experience Economy is a good read. (Skip everything but the first 2-3 chapters. After that, it gets redundant and a little weird at the end.)
http://www.amazon.com/Experience-Economy-Theater-Every-Busin...
If people don't value the retail experience, it's very possible it'll disappear aside from a few niches like perishables and very expensive impulse items.