"Living books" are basically the opposite of dull, dry textbooks. The people, places and events come alive as you read a living book. The stories touch your mind and heart. They are timeless.
Charlotte Mason lived about a hundred years ago, and tried changing the educational system in England so that children immersed themselves in "living books" that were "twaddle" free. Twaddle basically meaning foolish, dumbed down, or empty.
Textbooks were "invented" because society used to believe that the "masses" were not smart enough to read and understand literature. So education was broken down into dry, boring bite sized chunks that does nothing to fire the imagination.
Living books are just the opposite. The reader finds themselves carried away by the subject, their brain excited by what they are reading. Living books don't necessarily have to be fiction either. Math, science or history books can be "living" also. Living books don't have to be boring, college level books either. Sure, ****ens is great! But not everyone can wade through the language and get something out of it.
Example of living books for preschoolers are: Aesop's Fables, Babar the Elephant books, and Beatrix Potter stories. They are age appropriate, but stimulate the mind and imagination.
Early Elementary: Caddie Woodlawn, Charlotte's Web, Chronicles of Narnia, Johnny Appleseed, Little House on the Prairie, The Story of Dr. Doolittle, The Trumpet of the Swan.
Later Elementary: Anne of Green Gables, Arabian Nights, Around the World in 80 Days, Journey to the Center of the Earth, Cheaper by the Dozen, Little Women, The Prince and the Pauper, Old Yeller.
You might be interested in checking out the curriculum "Five In A Row." It is a unit-study approach to education based on living books. The lesson plans are designed to cover language arts, social studies, living math and science and art in such a way that helps children actually enjoy the learning process. I suggest you check out "Five in a Row" for ages 4-8. Your littlest one won't be able to participate as much as your older child, but will still benefit from listening in and hearing the stories. You can get more information here:
Five in a Row
You can also do a Google search for "living books" for more information. Hope this helps!