I live in Barcelona, and the municipal bike system here has been in use for about a year now (bicing.com).
It actually works quite well, (some teething problems with over-subscription, and thus often you can´t find a station with a bike or a station with a space to park again), but its advantages outweigh the disadvantages. The bikes themselves are nothing special, but they still get stolen and “pimped up” or “fixied”. It seems that a bike in Barcelona is a stealable/desirable item, and the only way to minimise the possibility that your two wheels get half-inched is to make them look as knackered and unsaleable as possible (think paint, old sut-up tyres wrapped around the frame, etc.)
It´s sponsored by ClearChannel (a controversial aspect of the system), and provided by the local council - you sign up for a year at a time, and receive a swipe-card to use at the stations.