I had to cancel a book because when I went to wrap it I discovered that it had highlighting in it.

Then I went to my posted books to delete it from there and I can't find it.

When you cancel a book is it automatically deleted from your posted books?

I just don't want anyone else to be disappointed.

It should have gone back on your bookshelf. Try to refresh the page and check it again. Also, check your Transaction Archive and see if it was cancelled.

If you cancel a request then the book is automatically taken off your bookshelf.  This is from the help center:

Note: If you have clicked "I cannot mail" on a request, or clicked "Cancel" on an active outgoing transaction, or the system has canceled your transaction for failure to complete the sending process by the deadline, the book involved will have been automatically removed from your bookshelf.

The book was removed from your shelf.

I canceled/declined a book request and now I want to send the book!

When you indicated that you could not send the book, the transaction was canceled, the book was removed from your bookshelf, and if there was another copy available in the system, the request was passed along to a new sender. 

You will need to repost the book if you want to offer it for swapping.

• If the previous requestor did not have his or her request passed along, your copy will then be offered to him or her immediately, and he or she will have 48 hours to confirm that she or he still wants the book.
• If the previous requestor's request was passed along, your book will need to wait for a new requestor.

If this was a request with conditions that you declined by clicking , you will not be able to send this book to this requestor.

This happened to me once (discovering a problem after the book was requested).  I cancelled the transaction but then PMed the person to see if they still wanted it as a freebie.  They did, they sent me their address by PM, and I sent it out.  I figured I'd earn some good book karma that way!