what are some good ways to help my 3-year-old learn to read?

[who *IS* John Galt?!?]

i'm not a pushy mother...but i have noticed that he is recognizing words like "castle" and "tarzan" to name a couple. so it seems maybe he is ready to start learning to read, no?
any ideas to help get us started?
we already read the early readers books and as i read i point to the word i'm reading...