When my son was a baby, he loved a book called Alphabet Band. An older friend had handed it down as a present. Outfitted with a side panel of buttons to push, the book talked. I can still remember the very electronic voice starting off, "Alligator number one/Squeezes the accordion." We took it with us wherever we went.
When the kiddo grew into a toddler, he decided to figure out how Alphabet Band worked. I'm not sure what he discovered, but the book did not survive the thorough investigation—and is no longer in print, either.
These days when I'm looking for gifts for babies, one favorite resource is the annual "Best Books for Babies" list at Beginning With Books, an early-literacy center in Pittsburgh. The 2009 lineup (for books published in 2008) can be found online here.
Now ten, the Alphabet Band enthusiast is happily reading (and not tearing apart) chapter books, but if he were a toddler or preschooler, I'd use the recommendations for that age group at the blog Your Friendly Librarian. I like her roundup of 2009's best, which includes the lovely rhyming picture book All the World, written by a blogging pal, Liz Garton Scanlon, and illustrated by Marla Frazee.