Over the last few years, I’ve been dragged kicking and screaming into the digital age. I listen to music, read news and watch movies and TV shows on my computer and my iPhone. The one area where I’m still holding out is books — as with most bibliophiles, I can go on and on about why physical books will never be replaced. But a startup called Lexcycle, which makes an iPhone ebook reader dubbed Stanza, could make me reconsider.

Stanza is currently the number one ebook app for the iPhone, and chief operating officer Neelan Choksi shared some other impressive stats with me. In its first six weeks, Stanza was downloaded 200,000 times — compare that to Amazon’s Kindle, which is seen as building momentum because it sells 40,000 units per month. Okay, that’s a totally unfair comparison, since Stanza is a free app. But if you can get a free ebook reader for your iPhone, why bother paying for the Kindle, or even a more cutting-edge reader like Plastic Logic’s? (Though of course the Amazon’s and Plastic Logic’s readers offer bigger screens, which is better for long-term reading.) People are actually downloading books, too — Choksi says one of Stanza’s content providers reports 20,000 downloads per day.

Like Stanza itself, all of those downloads are free for now — they’re either older works that have entered the public domain (in other words, no one owns the copyright), or they’re available for free via a Creative Commons license. But I’d be willing to shell out money to download the brand new novels, too, especially if that means I don’t have to lug around a thousand-page book like Neal Stephenson’s latest.

Choksi says Lexcycle is still figuring out its business model. But it will probably involve revenue-sharing retail deals with booksellers or publishers, as well as branded versions of Stanza that book and magazine publishers can offer on their own. I also wonder if Stanza ebooks could be priced more cheaply than a regular book, since I bet most readers would see the iPhone version as a supplement to a hard copy, not a replacement. If I’m at home, I’d rather read the physical copy, but the iPhone version is the one I can take with me on the bus — could the two be bundled together?

So what makes Stanza number one? I don’t think there’s anything particularly groundbreaking about the app, but it’s definitely been well-designed — the text is clean and readable, and you can either scroll through text automatically, at a pace that you set, or you can flip through it horizontally, as if you were looking at the pages of a book.

More than anything else, Stanza’s early success shows that the iPhone, with its big-for-a-mobile-device screen, is an okay environment for reading, and could really pose a threat to companies that make ebook-only devices. Choksi says Lexcycle is also looking at a version for the BlackBerry and other mobile devices.

Lexcycle is based in Portland, Ore. and is self-funded.