This waitress saw a book I was reading picked it up without asking and said this looks good. is she flirting?

yeah

You could offer to let her borrow your book when you are done and suggest that the two of you meet to discuss it over a cup of chocolate once she is done with it.
If she is interested in you, she should happily accept and she may even offer/ask to read the book together. If she was only considering the book, then she should politely decline.
As Rebecca-1992-UK pointed out, there is no harm in trying.

hmm difficult, I'm a waitress myself and I would never pick up a customers item unless I knew them well,
it kinda sounds like she likes you but you could be reading into it too much. I suggest you just go for it and see if she wants to go out sometime - no harm in trying!

Keeping in mind that every woman is different, my first reaction is that she is a waitress and therefore she is trained to be nice to customers. You get a customer to talk and feel welcome, that customer will come back and will tip well too.
I like reading, so it would not be uncommon for me to pick up someone's book and comment on it, and I would not consider it flirting. However, if I did not like reading, then picking up the book would be an invitation to start a conversation with that individual. Do you know which type she is? Reader or non reader?

More than concentrating on her picking up the book, I would concentrate on her overall behavior towards you.
Do you go to her restaurant often? If you do, does she try every time to be your server? Did you notice how she behaves with the other customers versus how she behaves with you? Does she smile every time she sees you? Does she pay a little extra attention to you? All these things might tell you if she is flirting with you because she likes you.

Best of luck to you.