This is a topic that has been cooking in my brain for a while and I have written on it before. But now I think it has reached its boil and needs to be addressed again -- especially in light of the new Nook HD, HD+, Kindle Fire, etc.
First and foremost, let me make it clear that I prefer the paper book. I just want to get that out there. I like seeing a collection of books on a shelf, I like holding it, knowing its battery won't die, the page will always load, and that it won't break if it happens to slip from my hand.
With that said, however, I also own an eReader. I own one that most might laugh at: Barnes and Noble's Nook 1st Edition. Here's a little video on it for reference (this is the product video for when it came out -- by a somewhat overly-excited Kate who markets all the Nooks for B&N):
My Nook has all that I need: books, limited internet (so you're not distracted by YouTube, Facebook, etc.), an audio player for audio books or music, a few simple games and that's about it. It has the necessities, nothing more. Also, nowadays you choose if you want eInk or LCD. This one has both. That is a huge selling point for me. You have eInk to read the books and to help browse the web, play games, etc. But you also have the color LCD screen at the bottom that supplements well with color covers, the full web page in color, etc. This allows the best of both worlds.
Another point is the fact that there is only one first of something. First edition books are always prized above all other editions and I think one day that will apply to eReaders as well. I have B&N's first jump into the market, and I think they walked on water with it.
But back to the idea of eReaders vs. books...it's simple. I use both. I prefer a book for ones that I really want to read -- like having Barnes and Noble's leather editions of the Chronicles of Narnia or the complete works of Edgar Allan Poe. The Nook is great for trying out an author for the first time, or for those other random books that you don't NEED in a hard copy (such as workbooks, inspirational books, ones just for fun, etc.). Having an eReader is also very convenient for travel as you can carry many books in one compact package, and for holding -- I've found eReaders beat books in comfort over time as they are lightweight and you don't have to hold them open or move your hand at all to turn a page.
The best feature, though, is the free sample option on all books. I use this all the time. If there's a book I want I always get the free sample on my Nook first, try it out, then decide if a trip to the store is in order, I'd just like the ebook, or I didn't like it at all. That is by far my favorite feature -- a portable "try me" station. You can also get many books free on Nook, that's fun too -- some can be quite good, too.
Overall I think they got it right the first time. They don't need a tablet, that I think was a bad move. Barnes and Noble is a book store, they need to focus on eReaders for books. The Simple Touch is awesome too, but at the same time, the color LCD for covers and the limited internet on the Nook 1st Edition is too cool to pass up (especially since I'd be downgrading with an upgrade in my opinion). If you want an eReader, pick up one of these on eBay as they are no longer available new. It's worth it, trust me.