My parents just brought the kids Fisher-Price digital cameras, and let me tell you, they are the greatest gift EVER. They even cleverly brought two (blue for him, pink for her) so they don't fight over anything. Both of my kids have spent the past 3 weeks discovering their inner shutterbug. These things are great - they take real pictures, there's a display so they can actually see what they're taking (just like mom and dad's camera), they're super-easy to use, uploading photos is a piece of cake, and best of all, they're practically indestructable! My mother was a bit concerned that my first-grader would think it was too childish looking, but that never even occurred to him, he's just thrilled to finally have a camera of his very own (of course they don't sell these here in Israel, so he's never seen it advertised for younger children either). These cameras are the hit of the party, too - every kid that comes over begs to try it.
The picture quality isn't fabulous, and works much better outside in natural light than indoors, but it's more than adequate for a younger child. Itai's been bringing his on trips and taking pictures of scenery, animals, people, whatever he can find, and doing a pretty good job of it too. Of course he also measures his success in quantity, not quality, but hey, with digital cameras that's just fine. Maya's particular area of interest seems to be floors and walls, with the occasional foot or chin thrown in. She may not have a career as a portrait photographer ahead of her (unless someone somewhere is prepared to pay big money for pictures of feet and chins), but she's having a blast.
PS If you're wondering, both of these pictures were taken on my son's camera at the Ein Gedi Nature Reserve in southern Israel (the desert oasis mentioned in the Song of Songs, where David hid from King Saul).
This camera definitely works for me. (Thanks mom!) Check out Rocks In My Dryer to see what works for everyone else.