Last week I gave a little tour of the toys in our home. Now for my philosophy on the toy thing. Not for everyone but heh, this is the place where you get bombarded with my opinions (he,he).
Keep it simple. Less is more. Open-ended. Non-specific. Natural warm materials. Organize. Rotate. If in doubt, throw it out (I mean pass it on of course).
For a one year old.
Almost no toys at all. Seriously.
inside:: pots and pans, wooden spoons, make a kitchen drawer with neat odds and ends to open during meal prep, soft blocks and homemade bean bags, a ball to roll and chase, basket of wool bits and strings or pieces of cloth, mini broom, feather duster, miniature animals, small blankets or scarves, lego (a few pieces of large size lego), simple wooden puzzles
outside:: simple riding toy (good for inside too), sand box, little shovels, water, bucket, ball, mud, snow, simple garden tools, and all the natural elements of your surroundings

For the two year old.
All of the above and:
inside:: good simple books, 12 piece wooden jigsaw puzzles (maybe 24), wooden train set with engines (we have Thomas because it is sold locally), simple puppets, small metal cars, dress-up capes and hats, little people and animal figures (we have a vintage Fisher Price (oops did say old?) set from my childhood that the kids spend a lot of time imagining with), cushions or a couch (or a mini trampoline) to jump on, little backpack, lego, small musical instruments, paint, things for sorting (e.g. buttons, beans, berries, string, bits of cloth etc.), bigger blankets and scarves
outside:: a simple sliding thing (sled), wagon

For the three year old.
All of the above and:
inside:: more elaborate dress-up outfits (tigers, pirates, wizards, firepeople, fairies etc.), books, 24 and 48 piece jigsaw puzzles, a simple structure to build forts (I attached rope to the walls in a variety of patterns for hanging sheets), big sheets and blankets and pillows, lego (the smallest kind at this stage - you don't need a lot), more and different puppets, baskets
outside:: tricycle, stumps, logs, rocks, climbing (our yard is pretty steep mountain terrain so we are set-up for climbing - now gardening, that's limited).

{forts - March 2009}
For the four year old.
All of the above and:
inside:: block crayons, scissors, other building sets to rotate on and off the play shelf (e.g. wood links, tinkertoys, knex), simple boardgames (candyland, jenga, frustration, cagola), watercolour paint
outside:: two-wheeled scooter, bicycle without pedals (add pedals when needed),

{playing library - January 2009}
For the five year old.
inside:: 50 and 100 piece jigsaw puzzles, more art supplies, playing cards, more board games, lego
outside:: hammer, screwdriver, simple materials to make outside forts (preferably from natural environment), this year we added bales of hay which has been a pretty neat plaything

{beavers in a dam - august 2009}
That's it. I'm sure I forgot a couple of things but really, with just some of the above you will have a very rich play environment. Especially because children really like to play with non-toy playthings most often. Notice how few things we added each year. Most of the playthings Iko uses (he's 6 in April) have been his favourites since the beginning (from the one and two year old category). He just changed the WAY he plays with these items. It has been very cool to watch this progression.