I think what Dan is talking about is a different form of "review." I would label this as criticism. Criticism takes the process a little deeper and has a different perspective. This is where concern for and judgments about "literature" come into play. Often these type of reviews engage the work at a deeper level and the result is more of an essay than a review. Criticism is for people who have already read the work and have a background with which to judge more broadly. There is no attempt to leave plot twists or unique characters unexplored. Criticism seeks to unpack a work, judge its effectiveness, and place it within the larger body of the author's work and within the larger scope of literature.
I don't necessarily disagree in principle with the distinction Kevin is making, but in my opinion we live in an era when those of us who love literature can't really afford to let "criticism" be relegated to the backwaters of literary commentary (which is where essays of the sort Kevin describes are often published--when they're published at all). Academic criticism no longer preserves a role for the kind of essay that "unpack[s] a work" and "judge[s] its effectiveness." At best academic critics use works of literature to illustrate favored theories or a brand of cultural analysis, but the time has long passed when "scholarly" criticism bothered with such things as "the larger body of the author's work" and "the larger scope of literature."
Thus, this kind of more reflective criticism has to be done in magazines and newspaper book reviews (perhaps in literary magazines as a supplement to the fiction and poetry these publications mostly feature) or it won't be done at all. Critics such as James Wood, Sven Birkerts, and Daniel Mendelsohn do engage in this sort of criticism, and they generally do so in the form of book reviews. It's not just a matter of the extra space allotted to some reviews in publications such as The New Republic or the New York Review of Books. These critics bring something other than "consumer guidance" to their reviews, even when (as they do) they write newspaper reviews. They bring a wide and deep knowledge of literary history, an ability to place current works of fiction or poetry within the context of that history, and an understanding that expressions of judgment need to be grounded in honest analysis. Even when I don't agree with them, I usually feel that they have proceeded through a "familiarity with the practices generally associated with the 'literary,'" (as I put it in my original post) and that they are ultimately most concerned to advance the cause of literature as a whole.
Furthermore, "analysis" doesn't have to be something dry and pedantic. In the context of book reviewing, it simply means that an attempt has been made to relate the parts to the whole, both in the work under review and between the work and the tradition or genre to which it belongs. A review does not itself have to be written in the form of a "critical analysis" as such; it merely needs to allow the reader to feel with some confidence that the reviewer has indeed paused for some reflection and analysis, has thought seriously about "the larger scope of literature."
If anything like "criticism" is to survive, it's going to have to be through book reviews and other forms of non-academic literary discourse--blogs, in fact, have made a good start at providing a forum for this kind of discourse. (And in this context, the "reviews of reviews" that are being done on several lit blogs are performing a very useful service, despite what some at the New York Times seem to think.) I wouldn't want to see book reviewing become dull and pompous, or, for that matter, entirely lose sight of the need to inform ordinary readers about new books that have been published so that those readers can decide whether to acquire any of them or not. But some effort to, as Kevin puts it, "engage the work at a deeper level" is never inappropriate, especially if you think that readers of serious books are more than just "consumers" and that literature is more than just another product to be sold.