For gifts that are both practical and fun, technology always hits the spot. Some of it can be expensive, but when one thing can do so much and provide so many hundreds or thousands of hours of entertainment, the value per dollar is actually quite high.
Here's a short list of some games and consoles to consider:
For Kids: You really can't go wrong with the Nintendo DSi. The games are fun (and mostly rated E for Everyone), kids can network with friends pretty much everywhere there's WiFi, and there's a full range of strategy and brain-building games that may actually teach them something. They're portable, the battery lasts a long time and they're extremely durable.
For Slightly Older Kids: The Playstation Go is a neat gaming device that also doubles as a movie and music player, and does much more besides. But there's a new version rumoured for 2011 that looks pretty good with dual analog sticks, touch screen, accelerometers, etc. An iPod Touch might be a better option in the short term, although from my personal experience the touch screen is not ideal for serious gaming if that's your primary use.
For the Family: There really is a little too much choice these days. The Nintendo Wii never disappoints, although its library of games isn't the biggest or the best and it's motion control gimmick is dated now that the Xbox360 and PS3 have their own versions. It's still the cheapest of the big three consoles, however, and bundles start at $209 with one controller.
The PS3 Slim is being sold under the tagline "It only does everything." And with movie streaming, web browser, free multiplayer gaming and other features that's somewhat true. Bundles start at $299. A single Move motion controller will cost $40 or $70, depending on whether you purchase the controller alone or also buy the navigation attachment - and you're going to want the navigation attachment.
The Xbox 360 is offering a 4GB bundle with the Kinect motion controller, two games and regular controller for an amazing $299. I'd recommend shelling out another $60 for the 60GB hard drive, which you can use to store movies, music, photos and games. On top of all that you're going to want the Play and Charge kit ($15) and maybe a second controller ($40 to $60).
Best Family Games: the beauty of consoles is that you don't have to play alone in the dark anymore. All consoles make a wide range of party games that people can play together. Of the Xbox360 Kinect titles, I'd recommend Dance Central, its highest rated title so far. For PS3 I'd recommend Sports Champions or Tiger Woods. Wii owners should look into the Boom Blox Bash Party or Super Smash Bros. or Wii Sports Resort. For families with older kids, the new Rock Band 3 is a good pick if you can find it anywhere - especially if you pick up the real guitar, pro drums and keyboard attachments - but it will set you back around $500 to get the best peripherals.