Well, I actually think it's cool. At least for those like me that already have an account in eReader.com.
I downloaded The time machine today, and I wish I had DL'd a couple of others on that list (Conrad and Chekhov are among my favorite writers). I could find them in Gutenberg, but then I would have to convert them, and converting a full length eBook from .txt to whatever it's something I like to avoid when it's possible.
I guess once you freely distribute an eBook, it'll be harder (if not impossible) to sell it again, at least for more than three dollars. The problem with copyright material would be to convince, say, Dan Brown (hey, this is just an example) and his publisher to do something of the sort. Even just to experiment it. EBooks for free might work to boost hardcopy sales, as Cory Doctorow knows, but not softcopies.
You can give some paper books for free, and still the rest of the people involved in the making and distribution of a book, besides the bookshop, could be benefited. But that would hardly work in the 1s and 0s domain.
All things considered, they're only after your email address, that's a fact. Well, and your money after that.
EDIT:
Hey! I found The time machine in Memoware!!!
Formatted for eReader!
What a scam! What a... what did you say? HOAX?
Fooled again!