I was just thinking about this today... wondering what other mamas do.
So, here's what I do:
NOTHING. (Well at least 9x out of 10)
Here's why: I really try hard not to intervene unless someone is getting or going to get hurt - either physically or hurt feelings (mostly these days it's physically as dd and ds lack the verbal skills to taunt and tease, but I decided that it wasn't just physical harm that hurts so I try to keep this in mind too).
I do not want to be a referee, and I don't want to set up the situation where I am used in their arguments (as in, "MOM, He took my toy!" and then I have to "side" with one child over the other.)
Also, I really believe at this age that they just don't have a clue what they're doing - they see the other one playing with something and it looks interesting, so they want it. They still view each other as objects now, so I have to remember they're not trying to be mean.
On the plus side, I have noticed that they settle their own "battles" a lot better and much more quickly than other kids their age. On the down side... I worry sometimes that they'll never "learn" to share! But I think sharing is a lesson better left for preschoolers.
Edited to add the above is what we do AT HOME. When we're with other kids in a playgroup, yes I do use distraction if dd or ds swipe another toddler's toy - for example, if dd steals another dc's toy, I'll say, "Sara is playing with this dolly now... Here is a fun boat for you!" and then proceed with showing dd what the boat does, etc. I do this because I feel self-conscious, because I am aware that most moms are all about saying "No Timmy, that's X's and he had it first - you have to 'be nice' and share!" I feel strongly that ds and dd are just not capable of comprehending such a speech and lack the cognitive/emotional maturity to empathize with another child and let them have the toy, and it's a better choice to just state the facts ("Sara is playing with the dolly now") and distract them with something else, which is easy to do at this age and keep everyone happy that way.