Classic Bookshelf
A very good site, makes reading online enjoyable with its customization features. Contains old classics.
Ebrary
Holds collection of e-books on various subjects. Only viewing is free. To browse one has to download their plug in.
Electronic Literature Foundation: Great Books
Contains around 109 online books on literature. The site provides free access to all the works. Some of the works included are The Rubaiyat of Omar Khayyam, Dante's Divine Comedy, Chaucer's Canterbury Tales, the novels of Jane Austen, and more.
English Server Fiction Collection
This site offers works of and about fiction collected from their members, contributing authors worldwide, and texts in the public domain.
Freebooks4doctors
FreeBooks4Doctors is dedicated to the promotion of free access to medical books over the Internet. There are good number of titles avaialble on different aspects of medical sciences. It provides links to free of cost e-books available on different sites.
Free online Books
Provides links to online full text of educational and technical books. Also provides links to online course, workshops, etc.
Health Books
Provides links to free of charge electronic books available on different aspects of medical sciences.
Library of Economics and Liberty
Provides access to full text of classic economics books, essays and articles.
Online Books Page
The Online Books Page facilitates access to books that are freely readable over the Internet. It also aims to encourage the development of such online books, for the benefit and edification of all. Books are available in all subject areas.
Online Library of Literature
It contains excellent collection of literature books.
Open Book Project
Provides access to good number of computer books. These are available for browsing and also saving of chapters in HTML format is possible.
Sunsite India: Virtual Library
Provides links to full text of computer books. The books covered here are bit old, but still worth to visit.
University of California Press e-books
Around 60 titles are available for free browsing covering different subject areas.
University of Toronto English Library
Provides full text access to collection of classic works in English literature. The collection includes prose, poetry and fictions.
World e-text Library Foundation
It is a global coordinated effort to preserve and disseminate classic works of literature, serials, bibliographies, dictionaries, encyclopedias, and other reference works in a number of languages and countries around the world. Provides free public access to all its collection, many of the works are also available for download.

OTHER LITERARY RESOURCES:

Beaucoup
A list of literature related search engines.

The BookWire Index
Extensive database of book resources on the Internet.

BookZone
The web's largest publisher community.

The English Server
Arts and humanities texts and resources.

Free-ed.net
Free online courses, tutorials, and study guides.

Homework Central
The best study and research collections on the Internet.

Literature and Books
The librarians' index to the Internet.

The Magazine Rack
Directory of free online magazines.

Newspapers Online
An easy to use tool for referencing the world's newspapers.

Zuzu's Petals Literary Resource
Bookstores, online books, and related information.

REFERENCE:

Encyclopedia Proteus
Search the best encyclopedias available online.

OneLook Dictionaries
Search 603 online dictionaries at the same time.

Refdesk.com
The single best Internet source for finding facts.

Thesaurus.com
A free online thesaurus.