Duane passed along some smart, simple twists on reading aloud:
Maybe this is what everybody's doing anyway, maybe not. But when reading (or singing) to your kids, especially the younger ones, pause periodically on the meaningful words and see what happens. Chances are very good that they can complete the thought for you, having memorized it from the many readings. Maybe not on the first try, in which case just continue reading. But if the pause becomes part of how the story is read you may find them jumping in eventually.
I was very surprised to discover that our 20 month-old daughter knows the entire ABC song, all the sound effects to "Mr. Brown Can Moo", and all the animals in "Brown Bear Brown Bear What Do You See." True it's just memorization and not understanding (knowing the ABC song is not the same thing as knowing or recognizing individual letters), but it's very early speech development and a great way to interact while reading. She loves getting to read a portion of the story.
For older kids try reading the words wrong ("He can sound like a cow, he can go honk honk!"), and see how fast they correct you. Or if that fails to keep their attention, see if they can recite the entire thing to you, entire sentences at a time. Great for memory skills. I tried reciting The Lorax once from memory while we were brushing teeth or something, and my oldest actually corrected me when I forgot a paragraph. She's 3.