Homemade Gifts By Kids

Some gifts to be made by kids:

Framed art. Let your kids play with paint, markers, colored pencils, crayons, glue sticks, fabric and paper shapes on sturdy paper or posterboard. Take the best bit and pop it into a readymade frame or have a custom frame built for it. Ask them to draw specifically for a relative or take samples of their work and collage it yourself.
Edibles. Any treat that's cut, rolled, dipped, or decorated will be most fun for the kids to make. These shortbread domes are easy and can be color-coordinated for the holidays.
Place mats. We made these for Thanksgiving, but winter-themed mats would be nice for Christmas (that way the recipient can use them after Christmas as well as before). Cut out some trees, snowmen, snowflakes, etc. instead of the turkeys and such for the kids to color and glue. Add photos to really personalize them.
Dough ornaments. Here are some recipes for dough ornaments. You can use Christmas cutters or any that seem appropriate for the person you're gifting. A couple years ago, we made my dad a fish-shaped ornament that was painted like a Christmas tree.
Microwavable salt dough ornament
Multiple recipes for baked dough ornaments
Wreath ornaments. Here is a tutorial for a super cute button wreath ornament.
Painted pots. Buy a set of small ceramic pots and help the kids paint them. Package the appropriate amount of potting soil and seeds (grass is good if any children will be watching it grow) and drop in the pots. Or paint a larger pot and use it to hold an unrelated gift (two gifts in one!) {My children did not paint the pots pictured above, but that was the closest example I had on hand.}
Year in Review Book. Give your faraway grandparents a book chronicling your child's year. "This year, I...." Let your child help choose events she wants to include, drawings, any personal messages. Add cute quotes, check-up stats, etc. See Blurb.com for making your own professional-quality book.