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You want Mythology by Edith Hamilton. It is fantastic.
And the first to read, as it is the most important, is the Iliad by Homer. This book formed the basis for classical education until at least the 1800's. I suggest the translation by Lombardo for several reasons.The language is very readable, and without pretension. Also, this translation is far less censored then the others; all the sex and gratuitous violence of this war story remain intact.
As far as allegory, as Hamilton explains, over 2 millennia the stories and allegory change, so it very much depends on what you are reading, and what the author was trying to say. Ovid was a pampered Roman dandy with disdain for mythology, so he tells the stories like simple fairy tales, where the allegory relates criticism of his own society. Homer, on the other hand, uses the horrors of war and the passion of human emotion to explain what it is to be human in a serious, epic style. I personally found the Iliad to be very inspiring, and Ovid to be somewhat trashy.
In the Iliad, as Hamilton suggests, you can substitute psychological emotions for each deity; for example, every time you see the word Athena you can substitute in the word courage and the story remains flawless. Likewise, you can substitute Anger for Ares, and status quo loving for Hera.
An example:
Today in traffic, *I got very angry* when some *&*#$##@ cut me off.
Can instead be said:
Today in traffic, *I prayed to Ares* when some *&*#$##@ cut me off.
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The first book that comes to mind is "The Golden Bough: A Study in Comparative Religion" by James George Frazer, published in 1890.
Very influential on its day, not so much today. Still, a fascinating read if you're interested in such themes.
Modern understanding of Greek mythology from Wikipedia shows also this:
The three main generations of gods in Hesiod's Theogony (Uranus, Gaia, etc.; the Titans and then the Olympians) suggest a distant echo of a struggle between social groups, mirroring the three major high cultures of Greek civilization: Minoan, Mycenaean and Hellenic.
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The thing that we often miss about Greek mythology today is that it never was a stable body of stories. While Judaeo-Christian religions have singular sources of authority (the word of God), the Greeks had a multiplicity of authorities. There were several different types of myth and LOTS of local variations. So, for example, a story about Theseus might be completely different in Athens than in Thebes. In fact, the word "myth" comes from "muthos," which just means "story."
The stories we have today are highly selective versions of these compiled from sources across hundreds of years (i.e. A lot of the myths we commonly reference, come from Ovid, who was a Roman).
In one sense, Zeus was just "sky," but in another he could also be an oracle and a figure with a biography, and those were not mutually exclusive.
To get a good sense of the variations of standard myths and mythic figures, with an eye to sources, I recommend theio.com and, if you want to get deeper into it, Early Greek Myth (2 vols.) by Timothy Gantz is excellent and accessible.