The reason I say this book is such a great example of a children's book for this particular age is the way the illustrations and text work together to move the story forward. There is minimal text in the book. This works well for kids around age two. They are more into looking at the pictures and the small amounts of text are about just as much as they can easily process per page. However, the illustrations are, first of all, beautiful. They are some of the most beautiful illustrations I have ever seen in a children's book. But also, the illustrations tell MOST of the story. They don't just show what the text already told you, but move the story forward. So the child can take the story forward by looking at the pictures and seeing what is happening.
While reading this book with your child try to think about asking open-ended questions that relate to what the illustrations are telling you about what is happening in the story. I know this is really obvious--but think about whether they can answer your question with a yes or no. If they can, then rephrase the question. I have noticed that Islwyn has just started really wanting to talk about the stories as we read them. He likes to point out things that he notices in the pictures. When we first read this book, it was the first time I really pushed him to respond to the illustrations -- more than just pointing at a pig and saying "pig." Obviously, you don't ask all kinds of questions on each page and/or every time you read the book. But I think stopping and discussing two or three of the illustrations is great for their comprehension.