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Reading to your little ones is such an important activity, but the youngest children will only pick out sounds that they are beginning to understand as words. The act of reading to them allows them to hear words over and over and slowly they will begin to distinguish the different words. In time, they will learn their meaning. In no time at all you'll have a preschooler who has a broad vocabulary, understanding thousands of words.
To encourage hearing and learning words, you can make reading fun by asking questions at the end of each page as you read to them. Read each page to your children and then ask them questions specific to what is happening in the pictures or the story. If you are reading to several children then make sure they all get a turn, and ask questions appropriate to their age and understanding. Your children will begin to widen their vocabulary, hearing the words repeated in a similar context. Make sure that even the youngest are asked their own question, even if it is as simple as 'Where is the sky?', 'Point to something that is red', or 'What animal goes [suitable animal noise]?!'.
Reading to your little ones is one of the most valuable exercises you can undertake during their first few years. Encourage a passion for reading and books and their learning will become so much easier later on. The more you can create an interest in books by making stories interesting and fun, then the better in the longer term for your little ones!