Imagine being an Olympics host city - but for culture. The title of European Capital of Culture (for a year) is important in bringing attention (and funds) to a city that, after rigorous competition, earns this prestigious designation.
It is an opportunity and a responsibility that is, occasionally, squandered or abused. Just as with the Olympics: there are great host cities (example: Sydney) and shitty ones (example: Atlanta). In either case, the way a city delivers on its laurels is a great mirror of the quality of the city's culture, its priorities and its institutions. Most importantly: the title is a way to mobilize the city and help it evolve new identities and directions.
If you are a cynical city with corrupt officials (example: Thessaloniki), it will show. If you are a dynamic city with enthusiasm and a strong civic society, it will also show (example: Glasgow).
San Sebastian ("Donostia", in Basque, the language & region of Spain where it is located), and one of my favorite European cities is definitely in the latter category. I am ready to bet that it will earn its title in 2016.