How do they work?

Totally didnt just rip that from the wikia. :P

I have called them APs for so long, that I honestly forgot, what the heck were Alchemy Points. --_-- lol

Minor correction to that Wikia post, they have changed it such that you can gain the AP after the reading of any book, not just a multiple of 16 intelligence points.

Essentially, AP are useful (and necessary) for battling, but not really useful outside of that.

The above are discussing the APs used in battle.

Just in case that's not what you were asking about, there is another form of Alchemy Points to be used in the Alchove to make certain items. You can read all about those in this [topic not found]

Is there a list of what books can give Alchemy Points?

You seem to have missed the point. Go back and read the quote.

The majority of books will give you one intelligence point. There are a two or three that give more than one, but they are rare and expensive.

The Alchove alchemy points are not related to books at all.

if you go to your pet page (personal->pets. Choose your battle pet (or if you don't battle yet, the pet you plan to train), and click on the arrow symbol in the top right corner of the pet to get another menu. Choose "books read", then you'll get a page with books, look for the the line that says: petname has read #### books! Click here to see what's missing!

Click where it says see what's missing and that will be a list of books that will give your pet intelligence.

If you have never read a book to your pet and it has a very low intelligence, you could benefit from playing Mystic Spindles before reading any books to your pet. As your pet gets more intelligent, it costs more to buy int from Mystic spindles.