Santa brings the kids some fun, (fairly) inexpensive items: pillow pets, pop guns, balloon rockets; and usually a family board game or family movie. Remember to include the grownups - we are dearly in need of 2 barstools so we can all sit as a family at dinner (I figure that's a nice gift from Santa, even if it is a little more $). Big ticket items for the kids come from Mommy and Daddy - with a reminder of how our jobs let us earn money to pay for the gifts.
Now that the kids are getting older, they are asking for things that they see other kids with: Nintendo 3DS, iPhones (!), puppies, etc. When I say "not this year" they say, "Santa can get it for us." I get to remind them that Santa does not bring the very expensive items, he leaves that to the mommies and daddies. After a couple weeks of this, my 5 year old has started talking about buying his own iPhone when he gets older and has money. :) I like keeping the expectations from Santa a little low - I hate to see them disappointed because they didn't get their "unrealistic" gift from Santa. They are always excited about their "fun" items.
Another thing to keep in mind: if you have kids at different stages of "believing", don't leave them out. I've never let my parents live down the year that they thought I was too old for Santa gifts (I was 13), and my 4-year old sister kept telling me how bad I must have been because I didn't get anything. I've made it a rule that Santa will keep coming to our house every year, no matter how old everyone is. :)