What does line of sight mean in the context of drone flight? If they have cameras mounted on buildings all over a city, does that mean that they can fly anywhere that they can see the drones from their cameras?

with packages weighing up to 55 lb (25 kg) in tow.
this is pretty outrageous. these are not 'drones' . these are small helicopters with 4 propellers.
you need a major onboard generator to carry 55 pounds for any length. either a fuel cell or a turbine/ice.
no battery setup is allowing for anywhere close to 55 pounds , let alone 20 pounds on a vtol platform, to be carried for any particularly meaningful amount of distance such as a 4 mile roundtrip.
for every pound of payload you add a non-linear extra amount of batteries. why? because the batteries you add, add their own weight, further increasing the amount of battery you need to carry them. so weight becomes an exponential problem at some point far under 20 pounds.
who are they kidding?

The FAA rules are bad, but they would not restrict delivery to "only...a few hundred meters of [somebody's] warehouses." They would restrict delivery to a few hundred meters of a TRUCK. And THAT is most of the U.S. outside of Alaska.

The United States is far behind the rest of the world is using drones. In Canada, for example, they use drones for traffic accident investigation and are able to clear the accident site hours earlier than we would. The FAA's foot dragging and American's paranoid sense of privacy have put us far behind.

Line of sight probably has to do with special localized GPS tracking stations that keep a tighter control of the location of drones rather than just using satellite GPS. Plus I am sure the drones are equipped with vertical as well as ground facing cameras to see if anyone is trying to "shoot them down" or to capture the criminal on camera who just fired a gun at it in cities like LA, and Chicago, I bet hours or days after the first launch of amazon drone delivery service that they will start taking "casualties" or a drone will crash into high power lines. :) LOL I can't wait for the hilarity Drone delivery in Texas and states with open carry laws will be humorous in the USA... LOL. Comical even.

A little late for "April Fools", don't you think? This is nothing more than a clever publicity stunt from Amazon and such a service will not materialize in our lifetime, or beyond. No amount of "incremental development" will ever solve the obvious perils of injury from malfunctioning drones, mis-delivered/stolen packages, malicious retaliation from snipers, or the potential for terrorists disguising drones to drop C4 randomly on peoples rooftops, government buildings, sporting events, etc. Within hours after any of these potential occurrences, ALL drone traffic will cease indefinitely and the $millions of capital invested will evaporate. Could Bernie Madoff be behind this?

I fear an overabundance and overuse of drones will put and end to the dream of a flying car. Plus, we will have drones dropping from the skies, killing people left and right with smiley face boxes as the cause.

It is possible to run these drones using a combination of batteries and a small IC engine made from extruded aluminium and plastic. This engine design is lightweight low noise and more energy efficient thus giving delivery drones longer range than relying solely on batteries.

Drones are already wicked-capable machines. Flight times and distance are already ample enough to make one-off deliveries.
I'd love to see a pack of electronics delivered via drone to my door step. Then maybe a Pizza.

@ Wanderkip
You could say all those things about self driving cars and they clearly will/have happened in our lifetimes.