Google announced that it is releasing a new version of the Android Market for Android 2.2 and higher. It will include books and movies.

Android Market movie rental was announced at Google I/O, the company’s developer event, but now it’s on the way. Google says it’s rolling out in the coming weeks around the world.

“In the U.S., you’ll be able to rent thousands of movies, starting at $1.99, right from Android Market on your phone,” says Product Manager Paul Montoy-Wilson on Google’s Mobile blog. “With the Videos app, available in Android Market, there’s no more waiting for downloads, syncing, or worrying about storage space. Simply sign into Android Market with your Google account, and you can rent movies from anywhere – the web, or your Android phone or tablet – and start watching instantly. You can also download movies to your device so they’re available for viewing when you don’t have an internet connection.”

“Also in the U.S., you can now purchase books from Android Market on your phone,” he adds. “Like movie rentals, books are linked to your Google account, so they’re instantly available across all of your devices – computer, phone, or tablet – without the need for wires or downloads.”

The announcement comes just as Netflix, the popular movie rental provider, announced price hikes sending customers into a fury. With the growing popularity of Android phones, the emergence of Android tablets, Google TV, and YouTube (which also now includes movie rentals), Google just might be able to grab a little piece of that Netflix pie. Of course they don’t offer DVDs so that’s not going to help those looking for a cheaper alternative to the Netflix streaming/DVD combo.

As far as Android tablets go, the company announced this week that a “near-future” release of Android Honeycomb will introduce a new screen compatibility mode to make apps that would otherwise have a hard time making the transition from the small phone screen to the larger tablet screen, more usable.

Users will not need to do anything special to update the Android Market. It will happen automatically. Those in the United States will be able to download the Videos app to rent movies and buy books.