I'm still a little fuzzy on how Project Gutenberg works, both financially and legally, but they have made a ton of books including many classics, available for free as eBooks.  These can be downloaded to the iBooks library.  The iBooks application has some really nice features for books that have been setup as eBooks including table of content hyperlinks, highlight and copy text, highlight text with a marker, look up words in a dictionary, take notes in the text, and search for other instances of text within the book.  I'm amazed at how powerful this standard app is and I am curious to how it might be used  in addition to or as an alternative to the physical book.