Subtext is a great free iPad app that I recently learned about from my Ed Tech Teacher colleague Greg Kulowiec. The list of the things that you can do with Subtext is quite impressive, but the basic purpose is to provide a place for teachers and students to have digital book discussion.
These are some of the many things that you can do with Subtext: using Subtext you can read ebooks, annotate ebooks, create quizzes about ebooks, and write blog posts about the ebooks you read. You can create private and public book discussion groups and build bookshelves for your groups.
To add books to your Subtext bookshelves you can pull from Google Books (many free ebooks are available that way), buy ebooks from Subtext (volume pricing is available), or upload your own titles (Greg Kulowiec has posted directions here). To annotate a section of a book just highlight it then choose what you want to do with it. The text that you highlight can be annotated with your messages, you can assign a quiz question to that text, or label that section as a literary element like "personification" or "foreshadowing."
Applications for Education
For schools using iPads in a 1:1 environment, Subtext could be a great app for book discussions. If you're interested in using Subtext, I encourage you to read Greg Kulowiec's detailed blog post about setting it up for classroom use.