I'm not a fan of single-book apps, that is, iPhone/iPad apps created specifically to display the contents of one and only one book, rather than reading them in an app that views many other books like Stanza or the Kindle app. Buying single-book apps is like having to build a separate bookshelf for every new paper book you bring home, or buying a new TV for every movie you rent. But I'll make one exception for children's books because of the multimedia and interactivity a dedicated app can offer.
I bought my son a copy of Dr. Seuss' One Fish, Two Fish, Red Fish, Blue Fish from Oceanhouse Media and it's wonderful. It's not just a simple digital rendering of the classic book, it's an interactive storybook that he can either flip through and read himself or listen to a guided audio version. He's just now learning to read on his own, and it's a perfect mix. He's familiar with how to use the interface from playing games and watching videos, so I didn't even have to show him how to use it. As each page flips the screen pans down to the relevant drawing and text. If he gets stuck on a word, he can tap it and the app will read the page aloud, highlighting each word as it goes. Not a bad way to occupy him for a long car ride or while I have to take a call for work. Remind me to get a video of him reading sometime or else I'll regret it.