Here is a list of websites that offer free online books or free E-Books you can download to read to your children! Horay you don't have to go out and buy more books!
Disney Digital Books:
They have a paid and non paid plan you can still read quite a few books with out paying. Create a free account and add your child's birthday they have an awesome birthday program!
Barns And Noble Nook:
You don't need to buy the nook to use these just download the free Nook App to your computer!
This is a crazy amazing website! Check out all their games as well!
Magic Key Children's Storybooks Online:
These are really cute short stories. Many of them are read out loud but some of them you'd still have to read to your child.
They have some of the cutest books out there!
ICDL - International Children's Digital Library:
I haven't used this one very much seems how we just discovered it but I have heard raving reviews!
This is story books for their favorite characters from most younger audience PBS shows.
A very select small sampling of free online books, however they have online interactive games that match some of the stories!
The Reading Room:
This place doesn't have a lot of kids books, however they have some awesome poetry, and a selection of chapter books for young readers.
Storynory Free Audio Books for Kids! (added February 5, 2011) They have a ton of classic books on audio for kids! This is a great way to get them learning the classic stories if they aren't yet reading.
These are the one I currently use and if there are thousands of free books between these websites... if you know of any others let me know! If you find any problems on any of these or have any feedback I LOVE COMMENTS!