I read several books on my iPhone as a test of whether or not I would enjoy reading electronically (I hate reading PDF's on screen at work) before buying an iPad. That was the better part of 2 years ago, and I haven't read a physical book since. I bought both my wife and I iPad 2's when they were released and then upgraded to the iPad 3 this year. We basically went through our bookcases, downloaded everything we wanted to keep and donated the physical books to charity. I can't imagine reading on a small screen like the iPhone but I also can't imagine reading on anything other than a tablet.
Besides, it saves the environment a wee bit
Instead of printing off all those several hundred page technical PDF's like I used to at work I just put them on the iPad instead...