(1) Always read to your tot. From the moment she could sit up, we started with Fisher Price board books. The stories were short, educational, colorful, and easy to handle. You have to get your child interested in books so that he/she will be willing to learn how to read. Kids love to emulate, so it's better if you're a reader yourself. It doesn't have to be books; if you're not an avid reader of pocketbooks, then why not read magazines instead?
(2) Teach ABC's and abc's. Naturally, to be able to read, your child will have to know all the letters and the distinguish upper from lowercase. Start with the capital letters. There are a lot of baby books that teach letters, but I found that simple flash cards were more effective. Books and cards with too much going on (or with familiar characters such as Mickey Mouse, Sesame Street, etc.) proved to be too distracting.
(3) Teach the sounds. Once your tot can recognize the letters by heart, it's time for him/her to know the sound associated with each letter. LeapFrog Fridge Phonics helped a lot, as did the ever-dependable flash cards.
(4) Put the sounds together to form words. A magnetic drawing board or erasable board helps a lot at this stage. Start with a simple word like "CAT". Break it into the sounds "Cuh" "Ah" "Tuh". Then erase and replace the first letter with say, "M". Break it into sounds, emphasizing that the first letter now corresponds to a different sound "Mmm" to say "MAT". Repeat for BAT, PAT, SAT, and so on. Be sure to use words that your tot is already familiar with! Use a different word base everyday. For example, the next day you can use "CAKE" and replace with "TAKE" or "MAKE". Once your child has the hang of it, start changing the last letters instead of the first letters, such as ""MAN" to "MAD", "MAT", "MAP", etc.
JOYTOY'S Spelling Fun Set includes 3-piece and 4-piece puzzles that helped my toddler learn to build words (and build puzzles to boot!).
(5) Familiarize your tot with sight words (i.e., most common words used in English language). The first learning-to-read books I noted in a previous post are a good place to start.
(6) Ready to read REAL books? Disney Reading Adventures Pre-Level 1 boxed sets contain books that are engaging, short, and easy to learn. Just the thing to boost the confidence of your early reader! Dr. Seuss books are also highly recommended, though my daughter never went through these because the cat scared her. I have a friend who says her child learned to read through the Dr. Seuss iPad app.
(7) Keep on reading. Move on to Level 1 and Level 2 Ready-to-Read books. There are dozens of titles and variations available at the bookstore, featuring many of the most popular cartoon characters of today.
I asked my daughter what was most effective in teaching her how to read. She said that apart from Mommy's lessons, the "subtitles" on her cartoons helped a lot also. Something to think about. Good luck! :-)