Are books peer-reviewed? I am unsure for books but I know for certain that selected journal articles are peer-reviewed.  (This just shows I am not in academia!)

Do books go through a peer-review process? If so, how does this happen? 

If one is approached by a small publisher, does it matter if this publisher does not have a peer-review service (if there is one for books).
Typically, after an author presents a book proposal to a publisher, the publisher will circulate the proposal to some selected reviewers to vet the content. This is not like peer review in the usual sense: the reviewers only get to see the outline and maybe a chapter or two. 

Once the publisher decides to go ahead with the book and it goes through the editing process, it might undergo further review, but nothing like a journal review.