Jenny The Bloggess and Nicholas Kristof at the New York Times have some suggestions for places to make donations instead of giving gifts.
Jenny writes that she buys a bunch of toys every year and takes a picture. The toys go to Toys for Tots and the picture goes to her parents. I love that idea.
My own parents have been making donations for several years now to a school in Nicaragua and to the Heifer Project in the names of various family members.