I picked up an iPhone Friday and downloaded the eReader software before I was out of the mall. It comes with two free books and I browsed through them at the bar where my wife and I stopped for dinner and a DRINK (You wait in line two hours, you deserve a drink).
Anyway, book reading on the iPhone seems fine. Obviously not as good as the the Sony or Kindle since this isn't a dedicated eBook, eInk device and you have to deal with the energy sucking backlight. But it is every bit as good as my iPaq.
What I like most about being able to read on the iPhone is that, although I may not have my Sony with me at all times, I always have my cell phone at hand. Thus, I'll always be able to read something.
PS: I did have my Sony with me in the iPhone line which made the two hours a lot easier to endure. Now, if Apple had just been handing out beer....