I have an old iphone that the girls use as an ipod touch & I realized I haven't downloaded a new app to it in over a year...maybe longer. I get so overwhelmed trying to look at them all & read reviews & just end up not picking any. I also have my own Nook with an android card in it that they use here & there when I can monitor them. So if there is something fab in the android market that isn't in the apple market, I'd like to hear about that too.
I am looking for more educational, but if something is just so much fun for your kids I'll take a look at that too...DD1 turns 5 next week & DD2 turns 3 in Feb. And I don't mind paying a couple bucks for something if it's worth it. We also asked for some gift cards for DD1 to B&N and itunes.
My daughters are five and three too. In a shameless plug, I make kids apps. I have two on Nook and one of on iOS, and a new one coming out in about a month. If you search for Corvid Apps you should be able to find them. My website has links to them as well www.corvidapps.com.
I have a pinterest board for android apps my kids like (there are also a handful of apps that I think are well done but are targeted for older kids) http://pinterest.com/bangerlm/android-apps-for-kids/
As for iOS, Tantrum Apps is a good developer as well as Toca Boca. There is a group I belong to called Moms With Apps/Parents With Apps that are committed to providing apps for kids using ethical business practices (no ads or predatory in-app purchases). Every Friday members from this group will offer free or discounted apps via facebook (https://www.facebook.com/AppFriday). If you do get some free apps via App Friday remember to rate the apps. :) The developers spend a lot of time and aren't making much money. Positive ratings help drive more sales and keep the developers in the business.
ETA: If your girls like listening to stories. Storynory.com has tons of free downloadable mp3 that are really good. My girls like the Katie the Witch and Bertie stories.