There are several different approaches to learning to read.
My DD's kindergarten used the Guided Reading Levels scheme, and encouraged kids to apply a variety of strategies for reading. Context, pictures, learning sight words, sounding words out, knowing what words would be reasonable to expect, etc. I thought that it was a much better approach than pure phonics.
Starfall is a great website. Our girls both loved it.
A lot of early readers are really boring....