Here's the best way to start:
Most students benefit from a core method book that includes learning to read music.  For the most part, while you do not need to read music in order to play most of the songs you hear on the radio (Tablature is simple to use), reading music helps you to learn the Fretboard as well as grounds you in Music Theory.
Buy One Now
Buy One Now
Check out Hal Leonard's
Easy Pop Melodies
More Easy Pop Melodies
Even More Easy Pop Melodies

I use these 3 books in conjuction with HLs Guitar Method.....make sure you purchase the books with the CDs.  They are fun but challenging and will definitely improve your guitar playing and sight-reading skills...make sure you strive to play with the CDs.

Alfred Kid's Guitar Course Complete (Book/CD)

Alfred Kid's Guitar Course Complete (Book/CD)

Alfred's Kids Guitar Course is a fun method that teaches you to play songs on the guitar right away. This complete edition combines Levels 1 and 2 with the activity pages of the Notespeller, and includes accompanying CDs so you always know how the music should sound. Each music lesson on every colorful page is explained in plain language. Students will learn from three irresistible guitar experts — a clever, classical dog, one cool jazz cat, and a friendly alligator who loves the blues. These instructors not only keep their students focused — they make learning how to play guitar extremely fun.The enhanced CDs that accompany the book don't just have great-sounding accompaniments, they also contain extra content for your computer. Children can watch the music on-screen as it plays, speed it up, or slow it down. 140 pages.This title received the iParenting Media award as one of the "Greatest Products of 2006."
My current favorite for anyone over 10 is the 3 volume method from Hal Leonard entitled: "Guitar Method Complete Edition" with CDs:  "The Hal Leonard Guitar Method is designed for anyone just learning to play acoustic or electric guitar. It is based on years of teaching guitar students of all ages, and reflects some of the best teaching ideas from around the world. This super-convenient Complete Edition features the new and improved method books 1, 2 and 3 spiral-bound together with three CDs!" 
For children up to about age 10 or so, I like to start them out with Alfred's Kids Guitar course.