Stacking rings: Babies love bright colors, which is probably why stacking rings have remained so popular over the years. Give a newborn a set of stacking rings, and he will still be playing with them when he's two. Teething tots love to chew on the plastic rings, and toddlers love the challenge of figuring out how to stack the rings in the right order.
Rattles: A brightly colored, multipatterned rattle with lots of accessories that squeak, pop, and crinkle is just the thing to keep little hands busy. Most rattles also come equipped with one or more teethers to keep budding teeth busy, too.
Welcome basket: Take a nice basket you have lying around, line it with pink or blue tulle, fill it with bottles, rattles, a couple of burp cloths, a little stuffed animal, and a small bottle of baby wash, then dress it all up with ribbons. The baby's parents will think you spent a fortune. We won't tell.
Clothes: Kids hate getting clothes for their birthday, but at this age, they won't know the difference and their parents will love you for it. You can find an adorable cotton sleeper or romper for about $12, and many even come with a matching hat or booties.
Baby's first library: It's never too early to foster a love of reading. Start Baby off with some of the classic board books (Goodnight Moon and Guess How Much I Love You are family favorites). Write a little inscription in the inside cover for a special personal touch.