I can't just scrape nytimes.com and re-host it on my own website legally - that's clear copyright infringement. Google news quoting article excerpts was legally controversial, as was their book search function, and their archive option.
I always assumed website owners were just sorta turning a blind eye to archive.org because (a) it's slow and (b) it doesn't get indexed in google
IA is physically holding a physical copy of the book, and then on a 1 at a time basis, allowing digital access to that physical book.
It would be like, purchasing a copy of the new york times, scanning it, and letting people online read it one at a time. Which would be perfectly legal except for the scanning and online. It paints the law as insane, not IA as flagrant copying.