iBooks is now available for iPhone. It can be downloaded now from the App Store, free of charge.
It comes with a free copy of Winne the Pooh (a real classic with lovely colour illustrations). This should look absolutely gorgeous on the iPhone 4.
The iBook interface is very nice, with page turn animations. I would personally like to see the option of autoscrolling text as on some other iPhone ebook readers (e.g. BeamItDown's iFlow). I've read books using this method and it is nice to not have to turn pages (ok I'm perhaps a little lazy ;-)
It's nice that there's a large selection of free titles thanks to Project Gutenberg, integrated directly into the iBookstore.
Interestingly, Apple have announced that authors can now self-publish to the iBookstore, foregoing the need for a traditional publishing deal, although there are certain criteria such as the requirement to have an ISBN.