Recently, my five year old and I were given a free three month subscription to Reading Eggs, a website set up to help kids to learn to read. They have an older kids version of the site, where kids who can read chapter books go, and a younger version of the site, for kids who aren't reading as well yet.
When you sign up, your child takes a quick quiz to determine their reading level, so they can assign your child to the proper level of the website. My son was right on par - he's five, he tested at a five year olds reading level.
The kids can do a vast variety of activities - reading sight words (each word races a car around a race track), reading full books, making a cute little charecter run on a treadmill by feeding the treadmill words in order, putting together words where the letters are mixed up, and more and more. The site is well put together, even with a small amount of reading knowledge, my son can capably get around the site by himself.
The site is colorful and eyecatching, and a terrific addition to life for your new reader! My son (who is a noted perfectionist...) even told me today that the other kids in class come to HIM for help figuring out words they can't read!
*Disclosure:* As I mentioned above, I was given a free trial membership to Readiing Eggs, as a member of homeschool.com. My experiences with the site are mine and mine alone.