My daughter is 5 now and in kindergarten, but she started reading right around her 4th birthday and reads very well now. My 3-year-old is also starting to learn some letter sounds although she's nowhere near reading yet.
We never used any kind of system. The best thing we did was to just read, read, and read some more. We have a ton of books at all reading levels from just 1-2 words per page to chapter books.
We also have the LeapFrog fridge magnet alphabet set that sings the sounds for each letter. Sesame Street and SuperWhy are great educational shows. My MIL gave us an old set of phonics videos that my 5-year-old watched about 5 times, and I think that helped, but she was already on the way to learning her sounds at that point anyway.
Throughout the day, we play little games with letters/sounds whenever they pop up. The other night at dinner, we tried to name a bunch of words that started with S. Sometimes in the car, we'll name rhyming words or talk about what letter a word ends with. If I see a sign with an easy word on it (STOP, No, go, etc.), we'll read it, sound it out, and talk about it.
Oh, and we do have a variety of activity books for the kids to practice writing letters/numbers, learning what sounds the letters make, and doing other preschool skills.
Just remember to have fun, and your daughter will be reading in no time!