About 9+ months ago we discovered a free, great website for kid's learning. It is for preschool age kids to learn letters, build fun holiday pictures, practice their letter sounds, sounding out words, etc. It is called Starfall.com.
Both my girls love to play it and I don't feel bad letting them because it is completely educational. The schools around here even use it in the early elementary grades for learning. Both my girls can navigate the site 100% by themselves.
We have an old computer that my girls get to play on while I'm on the real computer. The internet homepage is set to Starfall.com to make it even easier for them.