So, I'm playing with a Nook Color (oh, the hardship) and trying to compare it to my Kindle and my tablet. One thing I've discovered is that ebook file formats for free stuff are in every format imaginable. Some Kindle compatible, some Windows (my tablet), some Nook (Android/Nook). If you want to see the specs for the two as well as which file formats are supported, check out my File Formats (and features comparison): Kindle vs. Nook matrix.So, I stumbled across a few tools & resources for converting file formats for ebooks, especially for Kindle, since it does not natively support either .lit or .epub formats:

• MobileRead's Excellent Ebook reader page (lots of conversion tools)
• How to convert file formats for Ebook readers (MobileRead)
• Converting EPub to Kindle Compatible mobi format
• Kindle Publishing Tools (from Amazon)

As to what  to use to convert files to mobi (for Kindle) the most common answer seems to MobiPocket. While there are TONS of products out there to create a PDF from a file (even the free PDFCreator can be used to create (print) a PDF from a file  -- if you can open it in the original format, of course), anyone who has ever read a book in PDF format knows what a pain that can be. MobiPocket also looks cool in that it has a tool to create ebooks. Kindle supports other formats of ebooks, but mobi seems like it is probably the easiest to work with.I haven't tried borrowing a Kindle book from my library yet but but Lendle, a personal lending site, seems still be active, in spite of earlier problems with Amazon.