I'm surprised the thread has gone this far and nobody's mentioned
Alexandria Digital Literature (Alexlit) yet. Alexlit was one of the first e-book sites (though it concentrated on selling e-stories rather than full-length e-books, since back then nobody was sure whether people would actually pay to read full-length e-books).
Its big gimmick was that it used collaborative filtering to let readers rate the books they liked, then it would generate a list of books readers hadn't rated that they were likely to like based on what other people with similar tastes enjoyed. In other words, exactly the kind of thing you're looking for.
When it worked, it was absolutely brilliant, and it introduced me to many of my now-favorite writers who I probably never would have discovered on my own. Sharon Lee & Steve Miller, P.C. Hodgell, Vernor Vinge, Janet Kagan…
Sadly, it went down some years back and has never come fully back. They were planning a return in 2008, but then the stock market imploded and capital dried up.
Hopefully it'll still happen someday.
I interviewed Dave Howell, AlexLit's creator, a couple years back in
my Biblio File podcast. Interesting stuff.