I was wondering if there is a good library for python for decoding QR code. Basically what I would like is to give library image with QR code on it and the library would output contents saved in image.
Have you already looked at : http://pyqrcode.sourceforge.net/
If code compiling does not work for you, then there is also pure python implementation at : http://github.com/hcvst/pyqr
If you're still looking for something to do this a year later, you should check the ZBar project at http://zbar.sourceforge.net/. It looks like it started out for 1-D barcodes but has been expanded to include QR. It's implemented in C, LGPL licensed, and in addition to source has binaries for Linux, Windows and iPhone. Bindings available for Python, Perl, Ruby.
As of August 17, 2011 the core image processing portion of ZBar hasn't been updated since 2009 but there is recent activity on the iPhone development part of the project, which I'll interpret as the core being stable. There's also some activity in the SourceForge forums for the project.
It's also possible that pyxing (https://github.com/holizz/pyxing) would work but all that's there is an initial checkin of the port, so it's up to the (possible) user to check it.
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