There are a lot of different filetypes of ebooks. Some of the most common are PDF, ePub, .lit, .mobi/.prc, .pdb, and .fb2. There are also a lot of html and txt ebooks, but those filetypes are used for a lot more than ebooks.

To read ebooks on a computer, you’d need software that reads the filetype; there isn’t any one program that reads all kinds of ebooks. For dedicated ebook readers, like the Sony PRS series or the Kindle, they come with software, but only read some filetypes.

http://wiki.mobileread.com/wiki/Free_eBooks has lists of dozens of free ebook sites, both downloadable and read-online ebooks.

http://ezinearticles.com/?How-Does-the-Kindle-2-Work?&id=2003315

You need to pay for most of the books. But there are some websites like these two, where you can find more than ten thousand free books for ebook readers. So no need to go to library to borrow them, you can actually own them:

http://www.gutenberg.org/wiki/Main_Page

http://manybooks.net/

Hope this helps.

I own the Kindle 2, so let me give you more opinions about it. Among all ebooks readers, I’ll say the Amazon Kindle is the best. I think I’ve read over 30 books with my Kindle, no glitches so far! Kindle books are cheaper than actual books and I think I’ve saved over $100 for the books I’ve bought on the Kindle.

I like reading and at the beginning I did miss a bit on the feeling of reading books. But now I love to hold the Kindle, the e-ink seems to work very well, it is really like reading books… Now I often read with the Kindle for several hours but I don’t feel tired… And I now prefer to manage all books inside the Kindle rather than my never big enough bookshelf… And like to do bookmarking, annotation, dictionary lookup without any additional thing but a Kindle.

One of the reasons I love my Kindle is that it has helped me improve a lot on my efficiency and utilize my time. Before I have the Kindle, waiting time like when I’m waiting for friends or waiting for shuttle bus or some thing like that is simply wasted. Now I just need to bring the Kindle 2 along with me, and all my favorite books are inside it. Another thing I like the most is the text-to-speech function, which means I can "read" books without even holding or looking at the Kindle. Now I like to use this function when I’ve myself busy on some boring things, say when I’m on the step machine or doing some housework…

There are quite a lot of free books (tips: if you’re outside the U.S. all the books will have US$2 added, but when you choose to download to computer when you check out, the $2 will be waived, and you can copy the books to your Kindle through USB cable), and many Kindle books, magazines and newspapers are cheaper than the actual paper version. I remember I read these reviews about the benefits of the Kindle when I decided to buy it:

http://www.speedreaderxreview.com/amazon-kindle-20-review-speed-readers-complete-thoughts-on-this-hot-new-device

http://www.amazon.com/gp/redirect.html?ie=UTF8&location=http%3A%2F%2Fwww.amazon.com%2Freview%2FR2DUM7S4XW06QN%3Fie%3DUTF8%26ASIN%3DB00154JDAI%26nodeID%3D%26ref%255F%3Dcm%255Fcr%255Fpr%255Fcmt&tag=moreinfo-po-20&linkCode=ur2&camp=1789&creative=390957

Finally, in case you don’t know, Amazon has put a price slash on the Kindle 2 just before Christmas, and it is now selling $100 cheaper than the price I got my Kindle, and it adds in international wireless access and native PDF support… So take the chance if you want it.

Hope it helps