Yes - Kindle reads non DRM formats "free" books but I thought that the only "bought" books were in the Kindle format so you effectivly had to buy them from Amazon?
No, the books from Gutenburg are in Kindle (MOBI) format (as well as many other formats), anyone can use it.
I think you're misunderstanding how the DRM works... essentially, Amazon have made owning an ebook as much as possible like owning a "real" one. It can only be read on the Kindle associated with the account, just as you only have one copy of a book. It can be transferred to another Kindle, but then it will stop working on the first one. You can even lend it to someone else for a while- whilst they've got it you can't read it, just like a real book.
There's no question of your not owning it.
Unlike real books however, if you accidentally delete it (or the Kindle goes belly up and you lose the lot) you still own it/them and can download again for free.
I think it works well, and unless it's someone's intent to deprive authors of their copyright income then it's perfectly fair.
All that only applies to books you pay for of course, you can do as you like with the free ones as the copyright on those has either expired or been waived.
(That's only in the US, ideally you should check the UK copyright position before downloading from a US site)
edit- I'm not knocking the Sony or any other e-reader, I just like the Kindle
Edited by billford (Tue 04-Dec-12 21:22:21)