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As far as we can pin down, removing DRM is legal for personal use, but providing someone with the software to do so is illegal. So if you can build your own DRM remover, you're fine; anyone who helps you find DRM removal software is breaking the law. (That said, Google is your friend. All forms of commercial DRM currently in use for ebooks that can be read on mobile devices have been cracked.)
The rule for DRM: When looking at a new bookstore, see if there's a free sample to test the DRM with. Right now, the EZReader can read Adobe Digital Editions DRM, but the site may not tell you what form of DRM it uses. Barnes & Noble sells ePub & PDF, but uses different DRM that the EZReader doesn't have. (Yet, I believe.)
PDF is troublesome for ebooks, because it's almost never designed for such a small screen. (There are a few here at Mobileread were designed for e-ink readers; those are fine.) EPub is likely to be the new standard format, because it's versatile and easy to work with (it's just HTMLs collected in a renamed zip file, with an extra file that tells the ebook reader where to find the parts). Mobi is also very popular, but is proprietary, and was designed for more limited devices than modern ebook readers--it may have formatting limitations that ePub doesn't.
However, for reading novels, most formats are about the same. They all do fine with linear text. Most commercial non-PDF ebooks are poorly formatted, or at least very basically formatted--no consideration went into fonts, chapter headings, or any other details that would make them look nice on the screen. This is in part laziness, and in part because a few years ago, reading on a mobile device meant a ~320 pixel square screen with very basic fonts, so there was no reason to make ebooks look "nice." And although ebook readers have drastically changed, the processes used by publishers haven't.
To find what you like, experiment. Download some free ebooks from here at Mobileread, the same one in several formats, and see if you notice or care what the differences are. Head over to Feedbooks and try some of their free ebooks, in ePub and custom-sized PDF pages; pick up some .txt and .Mobi books from Project Gutenberg. Collect eight versions of the same book and see how different they look, and whether you've got any solid preferences about them.
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