At 4.5, ds enjoyed being read to for short periods of time. He was not ready for longer (i.e. chapter books) or books with a lot of text. So, we mostly stuck with short picture books, non-fiction books with lots of pictures (books about numbers, volcanoes, fire trucks, more fire trucks, buses, garbage trucks, more garbage trucks, etc.). He did ask questions and point to pictures. He didn't answer questions about the story though, if I asked them.
Note, I couldn't read to him at all between about 11 and 18 months - he was just too active and wouldn't sit still. We also spent a fair amount of time just looking at pictures (mostly when he was 2-3) and letting him explore books. Richard Scarry books are really good for that (I think I could recite Cars and Trucks and Things that Go by heart at one point.)
He did ask questions, but mostly about non-fiction books. Fiction books did not engage him as much until relatively recently (he's 6.5 now). We've just begun reading chapter books (Beverly Cleary, Magic Tree House).
There's good research to show that kids who view reading as a happy, cuddle time with parents will grow up to be readers. So, my goal is/was to make this a pleasant experience for ds -- and that often meant reading books that were 'below' his ability to understand. He began reading single words at 5.5, and now at 6.5 he is a pretty fluent reader (reading at a late 1st grade/early 2nd grade level or so). I'm not so concerned with his level of reading, but I am pleased by the fact that he reads with understanding and expression.