there are yellow bike programs in various cities: Portland OR, Austin TX that i know of, but many others. They work OK, but about once every year or so they have to add more bikes b/c the others disappear (people steal them or destroy them or whatever)...

i wasn't able to get the article link, but i think if there were some accountability it could be a good program...

here in Munich there is a rent-a-bike program that was recently bought by the Deutsch Bahn. not sure financially, but it seems pretty successful. i have been meaning to try it out just to see how it works, but i see quite a few people using them. they are pretty nice utility style bikes with a rack and painted a bright color with a green flashing light if they're not rented and apparently you call a 800 phone number (almost anyone who could afford to rent a bike has a cell phone here except tourists i guess who have to use a pay phone) and then use a credit card and pay by the hour and they remotely release the lock. I think it's cheap like maybe €1-2/hr or so. They are parked all over the place by the train/metro stops and in the park - i see people riding them on the bike paths through the park on sunny days all the time.

The same idea for a free system seems like it would work too although there would be some additional overhead costs... maybe a security-style card-reader or phone number to "start" and unlock the bike and then the same when you 'return' it (designated stations??) and you could track liability if one goes missing...