My son will be three shortly after Christmas, so his projects have to be simple! But each year so far, we've done a tree ornament with him for relatives (and I've saved one each year for him to have as a set when he gets he's got his own tree).
Year 1: we dipped his little hands in red and green paint and used him like a human stamp. Scanned the painting into the computer, shrunk it, and printed it on iron-on transfer fabric. Then I sort of made little pillows with cute Christmas fabric on the back and a loop for the tree.
Year 2: Salt dough ornaments. Ok, I helped a lot, but we worked on it together.
Year 3: I haven't decided yet what we'll do this year! I'll have to start thinking about it soon! I'm trying to think of sturdy things that look nice, if a little primative style, on the tree.
For our gifts to everyone, I just got it started...I split a pound of organic vanilla beans in a co-op this year and am going to do a vanilla themed goodie basket. I just got the vanilla extract started. Will get the vanilla sugar going this weekend.
For my grandpa who doesn't cook (and maybe my bachelor brother) I'm planning to put aside an assortment of jars from the goodies I'm canning this summer. It's the first time I've canned so we're having fun expirimenting with produce from the farmer's market. We should have a nice variety to choose from.