Penguin is doing everything it can to make ebooks unpalatable to libraries and their users.  By restricting transfers to usb this means that a reader can’t use the Kindle app on his iPhone, for example, to download and read a library book. From an article in the Washington County Cooperative Library Services website (blockquotes omitted):

If you check out a Kindle book, you may notice that some are limited to transfer via USB only.

This is due to restrictions publishers have placed on their titles. At the moment (February 2012), Penguin is the publisher that has chosen this limitation for their Kindle titles in Library2Go.

You can tell which books are published by Penguin by clicking on the title in Library2Go to get to the full information about that book.

What USB transfer only means that the Kindle book cannot be delivered using wifi to a Kindle device or to a Kindle app. The title can only be transferred to a Kindle device using a USB connection. Amazon states that “these restricted titles also may not be accessed on Kindle reading applications.” This means if you have a Kindle app on another device, such as an Android tablet or an iPad, Amazon states you will not be able to access these USB transfer restricted titles.

I use a Kindle reading app on my mobile device. What should I do if I want to read a USB-restricted title?

In our testing, we have found that most of the time, a Penguin Kindle title cannot be transfered to a Kindle reading app. If you are using an iOS or Android device, or any other device compatible with the OverDrive Media Console app, we recommend you use that app instead for reading USB restricted ebooks, or for all of your ebooks from Library2Go. Just be sure to check out the EPUB version of the title, not the Kindle version. Here are instructions for using the OverDrive app on your iOS device (iPhone, iPad, iPod Touch) and for your Android device.

I have a Kindle ereader. What should I do?

You can check out your title normally from Library2Go, but follow Amazon’s instructions for USB transfer to get the title to your Kindle reader.