E-books for Kids! The Tumble Book Library is an online collection of animated e-books for kids
FreeLoad Press and Textbook Media offer textbooks free to read (downloadable for a fee)
Project Gutenberg has over 27,000 free ebooks for both adults and children.
WOWIO, modern and lively books free to read online (but downloadable for a fee)
Children's Books Online is a collection of illustrated antique books.
Also check out the many free audiobooks available at Librivox