It's best to take an indirect teaching approach when introducing toddlers to reading. Keep the teaching activities fun and short, and never pressure your toddler to learn. If he or she is not in the mood or is bored, then stop and do something else.
To start with, familiarize your toddler with the alphabet. Take a look at the article A is for Alphabet - Techniques For Teaching Toddlers Alphabet here on Bright Hub.
Keep attractive illustrated books, particularly board picture books and alphabet books, lying around and encourage your toddler to look through them and point and "name" the pictures.
Read often, so your child learns that reading is an activity you enjoy, which may make him or her more interested in modeling your behavior.
Read regularly to your toddler. Reading stories and poems your toddler enjoys can create an interest in books.
If your child wants to read the same book again and again, then keep reading it! This is a form of memorization; the first stages of reading.
Read slowly and clearly, but with the dramatic flair and rhythm that a particular story or poem requires.
Hold the book so the toddler can see the words and pictures on the page. Follow the words you are reading with your finger so the toddler can make an association between the sound of the word and its written form.
Print your toddler's name on his or her books. This will help the toddler to recognize the way his or her name is written.
Display colorful posters with cartoon characters or animals that will catch your toddler's attention. While reading descriptions, point to the animals and characters on the poster or in books.
Help your toddler to recognize words by making reading a part of your everyday activities. When you go shopping, for instance, help your toddler identify and read road signs, store front signs, entry and exit signs, shopping aisle signs, and the lettering on boxes and packages. If you go to a restaurant, help your toddler read the word 'Menu', some of the words on the menu and the words on the restroom door. Being able to read environmental print will increase your toddler's burgeoning interest in the world around him or her.
Purchase board games and interactive CD-Roms and videos that will further help your child to read.