One of the iPad's marquee features is iBooks, Apple's book reading application and bookstore. It's a good app, attractive and capable. The bookstore itself isn't bad either, with a healthy selection of popular books and a large library of free, public domain works. But be careful before you dive into the Apple ecosystem for books.
iBooks competes with Amazon's Kindle. The new Kindle app for the iPad lacks some features iBooks has, but makes up for it with superior flexibility, and a few useful features iBooks does not have. While the iBooks and Kindle apps are both free, given the choice, I strongly recommend that you buy your books from the Kindle store.
The primary reason: when you buy a Kindle book, you can read it on your iPad, your iPhone, your PC, your Mac, and of course on a Kindle reader as well. With an iBooks book, the only place you can read it is on the iPad.
If you buy a non-DRM'd book from Kindle, you can also get it as a file from your PC, and archive it wherever you want (or share it) if you like. For Apple's iBooks, non-DRM'd titles can be retrieved if you dig into iTunes -- an app you otherwise don't use when buying or viewing iBooks titles.
It's easier to buy Kindle books if you don't happen to have your iPad with you: you just go to Amazon.com and pick them up--and the iPad has a good Web browser to make this work. The only place you can make iBooks purchases is on your iPad.
Both platforms can give you a book sample before you buy a title, but iBooks gives you more text, and it's a little easier to buy from an iBooks sample.
In the reader apps themselves, it's a contest. The iBooks reader has a dictionary built in, and a search feature. But the Kindle app lets you take notes (and syncs them to your other devices as well). Both apps have in-app brightness controls, and both give you silly page-flip animations (the Kindle app lets you turn it off, thankfully).
Neither app or store allows you to do important things that you might want to do with a real book. You can't buy an e-book as a gift in either store, and you cannot lend or give a book you already have to another iPad user. The Barnes & Noble platform is ahead on this game, but it's not on the iPad.
As far as the bookstores, I found several titles available on Kindle but not iBooks, a few on iBooks but not Kindle, and many recent (although no longer chart-topping) books available on neither, which was a surprise. Books that are on both are mostly priced the same.
Overall, the little feature differences between the reader apps balance out. Both apps are good, not great, for reading on. But you get better flexibility with Amazon Kindle purchases, which makes it a better place to buy e-books.
See also: Why Apple's iBooks falls short of Kindle--for now.Corrections: I was initially mistaken about the availability of free samples on the Kindle app for the iPad, so this post has since been updated. Also, I have corrected the section about downloading e-book files.