My local library has been doing something similar to this for years. Somehow, these are security locked to run ONLY the library's internet and book catalog software, though you could download and install temporary things like flash and java plugins which are all gone the next time someone logs in. I always wondered how they did that on W98 machines...
Another library in town has thin-clients hosted on some 'other' os, I think QNX, based on the look of the browser.