The Open Library is an initiative of the Internet Archive, a 501(c)(3) non-profit, building a digital library of Internet sites and other cultural artifacts in digital form. The library allows users to checkout digitized books for up to two weeks (requires signing up for a free account). While many sites focus on works in the public domain, the Open Library has more recent offerings available. This can be a great place to direct students if you'd like them to seek out and discover some texts or authors on their own.
The site contains stand alone works (novels, poetry titles, plays, etc...) as well as collections and anthologies. Currently, it contains almost 1.5 million titles for digital lending.
Many Books began in 2004 with the goal of creating an extensive, free digital library. While a number of books overlap with Project Gutenberg, there are also a number of more recent books/authors being added daily. The ability to browse the site by genre and a more intuitive search function may make it easier for students to browse and navigate than Project Gutenberg.