Here's what ALA says, and I start there because they were the governing body of books when I was a practicing librarian. Again, that's American Library Association.
CHILDREN'S NOTABLE BOOKS
Terms and Criteria
FUNCTION STATEMENT
To select, annotate, and present for publication annually the list of notable children's books of the preceding year.
CRITERIA
Notable is defined as: Worthy of note or notice, important, distinguished, outstanding. As applied to children's books, notable should be thought to include books of especially commendable quality, books that exhibit venturesome creativity, and books of fiction, information, poetry and pictures for all age levels (through age 14) that reflect and encourage children's interests in exemplary ways.
The evaluative criteria to be used are:
literary quality;
originality of text and illustration;
clarity and style of language;
excellence of illustration;
excellence of design and format;
subject matter of interest and value to children;
the likelihood of acceptance by children.
BOARD ACTIONS: "The ALA Notable Children's Books List, compiled by the ALSC Book Evaluation Committee, shall include the annual selections of the Newbery and Caldecott Award and Honor Books." - (July 1976)
"The ALA Notable Children's Books List, compiled by the ALSC Notable Children's Books Committee, shall include the books selected annually by the Batchelder Award Committee." - (July 1981).
"Beginning with 2004, include the Sibert medal and honor books, and the Belpré medal and honor books with a copyright date of the previous year, on the annual Notable Children's Books List" - (November 2003).
"Include the Theodor Seuss Geisel Award winner and honor books automatically on the list of books created by the Notable Children's Books Committee, starting with the first award in 2006." - (January 2006)
ELIGIBILITY
To be eligible for consideration a book must:
Be a book for which children are a potential audience. See criteria for age range.
Have been published in the United States during the year preceding the Midwinter Meeting at which the selection is made. This means that the book was published in that year, was available for purchase in that year, and has a copyright date no later than that year. A book might have a copyright date prior to the year under consideration but, for various reasons, was not published until the year under consideration.
NOTE: There is no limitation as to format. A book may be in hard or paper covers, spiral bound, in portfolio, etc. It is expected that books will have a collective unity of story-line, theme, or concept developed through text or pictures or a combination thereof.
NOTABLE CHILDREN'S BOOKS LIST
The Notable Children's Books list is an annual list of the books selected from the publishing of a particular calendar year. The committee reads extensively during the year and at the ALA Midwinter Meeting selects for the list those titles they believe to be notable. The list is intended for children: to assist them in selecting books to read, to encourage them to seek out those that are considered notable among the many books available in bookstores and libraries. While it is not expected that every children's library of all sizes and types will necessarily select all of the books listed, it is hoped that nationwide, through library networks and bookstores, children will find these books to be accessible.
Not everyone is expected to agree with the committee's decision on the notable books. However, disagreement can lead to a sharpening of one's own critical sense and can be used as the basis for discussion in a group setting.