Like many kids, my children love to play on the computer. Bright lights, lots of action, sound and music all capture their attention. Two websites that I particularly like for children learning to read are: PBS Kids Island and Starfall. Both sites help children develop early literacy skills while having fun. Both are solidly based on literacy research, and both have no advertising. Best yet, both are free and easy to use.
PBS Kids Island is a fantastic site for children ages 3 - 7. This site uses many games from across PBS shows, tying them together to match your child's reading development. You log into the site each time, and so your child is able to build their own amusement park with games they earn each time. As your child develop his/her reading skills, the site adds more complex games. The reading games have been collected from elsewhere on the PBS KIDS website, from a family of reading-based TV shows including Sesame Street, Super WHY!, Word World, and Between the Lions.
PBS Kids Island, both as a parent and a teacher. My kindergartner loves coming to this site. The games really engage her, and she's definitely motivated by earning tickets and adding games to her island. I particularly like how the games are sequenced, so she had to play the early games (with basic letter recognition) before progressing to the more difficult ones (with word building, rhyming and word recognition). This helps introduce and then reinforce basic literacy skills, while keeping the games fun and easy.
Starfall is another excellent site for early readers. Starfall.com opened in September of 2002 as a free public service to motivate children to read with phonics. This site is much more directed toward phonics than the PBS site, but it is engaging and fun.
Do you have any websites that you like using to help your early readers? I would love to share additional ideas. My criteria is that they are free of advertising, and combine both phonics and fun storytelling.