The Book of Lore used to be found in the end chests of dungeons, but as of v1.0.2 they can only be obtained by pressing "B in-game. The volume you receive depends on what region you are in. There are three volumes. Volume 1 covers the Surface, Volume 2 is about the Nether, and Volume 3 describes the Aether. You can use a book by right-clicking when it is in your hand.
When the book is opened, you can put the appropriate items in the space to get some info on the item. It does not show crafting recipes, but rather describes its functions.
||The more you know!
||Read a book of lore
||Read any entry in any Book of Lore
||It's a book in a book in a book in...
||Place any Book of Lore in another.