My girls had two very different experiences in learning to read. I read them loads of books at the time (say, 20 stories every day, including picture books, board books, chapters of longer books). The girls would have been about 3 and 5 at this time.
DD2 liked to pile up books and look through them. We would have around 75-100 books from the library at any given time, plus our own and she would sit on the big papasan cushion by the bookshelf and pull them out one at a time to look at them. When I read on the couch, she would pull up a stack on books to look through (partly because I read big, "boring" books to her sister). Once when she was 3yo, I was reading a picture book in Spanish (an interest at the time) and she suddenly asked, "Momma, what's pahLLo?" (L's pronounced). She would have had no idea, because I would have been saying "poYo" ("pollo"=chicken).
So, her understanding that written words=spoken words, and that the letters symbolized sounds happened very early. But then, that was it for a loooooong time. Occasionally she would painstakingly sound out words (like this one from a Chinese restaurant sign) "Puh-AAAAAAAAAAAA- NNNNNNNNNN- Duh- AAAAAAAAAAAA, stretching it out interminably. But mostly, she just looked at books incessantly. She made a little cardboard box "desk" that had a cubby in it. She would store feathers in holes she poked in the top and slowly trace the letters with them like Hermione Granger. She looked at everything from board books to dense nature books.
Slowly, she just emerged, bit by bit, but it's only been since she was 7 or so that she has been comfortable enough reading at length for pleasure.
DD1 took a different trajectory. She had always been an intense listener, and enjoyed the Mowgli stories, Just So Stories, LoTR, The Hobbit, Harry Potter, all by the time she was 5; and Winnie-the-Pooh and Pippi Longstocking and the original Pinocchio when she was 2yo. For some reason, she looked at whole words, or skipped over the middle letters and made a guess. After being familiar with letters and words blah blah blah, it was really an English/Spanish storybook that got her on her way. Spanish is nice and comforting in that each letter is almost guaranteed to have the same sound every time. Being a perfectionist, she was probably mostly held back by English's trickery. It also helped her slow down a little to not trip over the middle letters.
She liked graphic novels and liked to try reading the speech bubbles while I read the narration. She liked comics collections, namely Garfield, and loved to make the sound effects ("AIIEEEEEEE!!!!!") She also loved reading the trivia questions for our LoTR game, and other game cards. She loved reading out the lengths and other facts in our beloved Oceanarium book.
For her own reading, she loved her horse book. She would copy the facts over and over (her sister liked to copy books as well). This was a slow process, and just like her sister, it's just been in the last year (since 9yo) that she has felt comfortable enough to sit and read for fun. She resisted mysteries for a long time because the work of reading interfered with the story itself, but just last week, she inhaled a (Jigsaw Jones?) mystery all by herself.
Our wooden alphabet puzzle has gotten loads of mileage. They used to love arranging the letters in a string for me to "sound out": KJHGFDSALPOIUQWEYRTMNBZXCV. Hmmm, let's see....
DD2 would steal my sticky notes ("my"--ha!) and trace the letters so she could make long words on the living room window. Between that toy and the game cards, those were our best reading practice tools. And the loads of books for *all* ages, of course.