IA was trying to act like a library: they bought physical books and lent digital scans of them, ensuring that only one user can read one book at a time. So IA's position is that you can treat digital books like physical books, i.e. re-sell them or lend. The only difference is that they don't require you to come to library in person.
Publishers position is that digital books are different from physical; you have no right to re-sell or lend it without publisher's permission. This is what this case is about.
Techincally the publisheres were already complaining before but they knew that the stakes were really unclear (there is a possibility that they lose and set a precedent against their wishes), but IA realy opened a gaping hole with the emergency lending program.
Publishers position is that digital books are different from physical; you have no right to re-sell or lend it without publisher's permission. This is what this case is about.