Starting with iWork '09, you can create your own ePub books with Pages (that is the format of the books found in the iBooks app on an iPad or iPod).
The actual directions of what to do can be found here.
You can watch a movie of the process here.
Open the Pages file contained in the zipped file below (it's basically the same as the Apple template available at the link above) and choose File > Save as Template. From then on, you can make a fresh copy from the My Templates section of the Template Chooser (at start-up or from File > New from Template Chooser).
Additionally, we've found:
- Using the Apple template gives you a broad range of styles to use, but it’s not essential you use it.
- To force a page break, put the cursor where you want the break and choose Insert > Section Break. Make sure the new section starts with the Chapter Name style (if you’re using the Apple template) or the Heading 1 style (if you’re using a blank word processing document).
- Use the Heading style (in the Apple template) to make a sub-heading under the Chapter Name style (use Heading 2 style if you’re using a blank word processing document).
- You can use a blank (no text) Chapter Name style to use along with a Section Break to force a page break if you don't want text at the top of a new page.
- Justification styles do not seem to be respected.
- Audio files can be played on the page in iBooks; video, too, on an iPad. On an iPod, video plays in a player, but audio plays on the page.
- You can make internal and external links in Pages that will follow through in the ePub.