Books is a native eBook reader for the iPhone. Capable of reading HTML and plain text stored on your iPhone.

New in version 1.2!

Inline image support! The update you’ve been waiting for! Images smaller than 300 pixels wide will appear as-is; larger images are scaled to fit the iPhone screen. (Sorry, no zooming.) You can still look at individual images, pixel-for-pixel, from the file browser.

Improved sorting in the file browser! Your book files will always appear first in the list, over the images.

Cyrillic support. Thanks to Russian user Michael for pointing me to the correct text encoding.

http://code.google.com/p/iphoneebooks/