Each DVD has a barcode on it, so it keeps track by that. (edit: philip beat me to it)
The titles themselves have all been widescreen so far with the exception of one that I noticed the other day. Can't remember what that title was, wouldn't rent it.

I hope that was just a fluke though.
It has been pretty cool though. The only folly I have seen is that it is hard to get good titles on the weekend. Those kiosks go out quick. I noticed a few McD's near me have added more kiosks which has helped a bit.
I've gotten some emails from them as well with codes for rent one, get one free codes.
It's a great bargain and I hope it succedes as long as they keep their healthy stock of widescreen titles.