We got my older daughter a Nook Tablet a year ago for Christmas, and she reads almost exclusively on that. Her room is much neater now - it was swallowed by a pile of books before the Nook.
The younger one got a Nook Color as a gift around Christmas this year, but she doesn't use it much. She's still in the picture book age and likes to turn the pages and all that.
I love the e-reader for the older one though. She doesn't lose the book she's working on, she doesn't lose her place in a book, she doesn't have tons of books all over the place. It's great.