Aye if you can find a good supplier of the books they can work out very cheap on an ereader - I think the books on my one have so far averaged at about £2 each, including the cost of the reader (100 books that came with it, about 25 books bought from Baen for £40, another hundred or so from various other sources including baen's free library).
Hopefully with the Kindle coming out the average price of Ebooks from other stores will drop from the current "paper back RRP" type pricing to something that reflects the reduction in production costs (IIRC it costs about 1/4 penny per page to print a book, so an ebook RRP should really be at least £1-2 below the paperback RRP).
The cost of the ereader is considerably less than many people will pay out on a mobile phone*, and if you read a reasonable amount will likely get a lot more use than a mobile
and for some people something like a reader makes much more sense than a mobile (as you can make the same sort of argument about the costs of mobiles that can be made about the cost of an ereader, and yet a lot of people won't bat an eyelid at the yearly cost of a fancy mobile on contract).
Also, and I don't think anyone has mentioned this yet, one very major bonus of an Ereader is that it can almost always do large print, for any book available on it.
That may not sound much until you realise how hard/expensive it can be to locate large print books (I suspect if Sony and Amazon where to make that a selling point they would see a lot of sales to "wrinklies", I know it's certainly been one of the things that has impressed a lot of my dad's friends, and is one of the reasons he loves his).
I personally wouldn't be without an ereader now, as I love reading but it was reaching the point where I was having to buy books then get rid of them after reading (there are only so many times you can really request a particular book at the local library, and even that costs £1.50 or so a time), with the reader I'm able to have hundreds of books taking up less space on my shelves than a single paperback.
I still buy the paper books, but now it's just those that I really want such as the new Pratchetts, Banks or Hamiltons.
*What's the average cost of a monthly contract with a "fashionable" or all singing/dancing phone?
(from what I can see t's normally about £30ish)