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I personally use OpenOffice (well, technically now LibreOffice, but it is the same thing, just a new name due to the Oracle buyout of Sun, and the people at Oracle being jerks.) for writing. It is free, and has the ePub export function. Usually there after I go through and make sure all is arranged well, in Sigil (another free app). Sigil is meant just for working with ePubs. You can work directly in it if you want as well, since it is a pretty decent word processor.
As far as PDF goes, it isn't a true ebook format, and people with eReaders will avoid them, but for people who are new to ebooks, or are in certain circumstances, they will still get PDF. I'd still have it as an option, but you'll probably find that there will be fewer downloads of PDF than Mobi or ePub.
I personally use Calibre (free ebook manager) to convert to different formats. You may want to use this to convert to mobi for the Kindle users.
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