Both paper books and e-books have their advantages, and I read both. E-books are convenient, I can hold a library in my hand. Books that were hard to find in paper are easy to find as an e-book. I had always wanted to read Don Quixote, but I didn't relish lugging around an a 1000+ page book. I could easily enough buy a copy in paper, but what if I didn't like it, and never got around to reading it? Or I could buy a used copy cheaply, but with old paper books, the paper can be yellowed and hard to read. With an e-book, it was free, and the e-ink screen was easy on the eyes.
Then there's the ability to change the font size. I'm reading The Last Chronicles of Thomas Covenant in paper, and the font is tiny. I keep wanting to increase the font size.
There are so many free books out there. When I first got my e-reader, I was grabbing up every free book I could. I've since slowed down, and only get books I want to read, even if they are free. Project Gutenberg is a fantastic source. I still buy books though.
The dictionary feature is a big plus. With paper, if you don't know a word, you can dig out a paper dictionary, figure it out by context or just skip over it. But with the e-reader, the definitions right there.
Not everyone likes it, but I enjoy the text to speech feature on the Kindle 3. It's great for when I'm in the car.
Paper books have benefits too. You can sell them or give them away. You can buy them used at a reduced price. And a bookshelf is, in my opinion, an enjoyable way to search for a book.