Well, I think how much you spend depends on how close you are to the family. I never spend less than $25, but have spent $50, too.
As for what to buy, as the mom of a 2 year old I can tell you what not to buy:
Stuffed Animals - yea, they're cute but our son has about 50 of them - and I'm not exaggerating.
Toys that aren't age appropriate - we rec'd a gift for 3+ years on his 1st bday. Now, this can be looked at in a positive way, he plays with it now and it was like a new toy to him.
Books where the pages rip - although our son is getting better, he still likes the sound of ripping and crumpling paper. The cardboard books are great.
Clothes, unless you know where Mom/Dad shop and exact sizes - our son is a skinny minny and at 2 y/o was wearing 12m shorts, still. And although overalls are cute, he HATES them. You never know with a 2 year old! Lol.
No matter what you give, try and give a gift receipt. We received 2 Hokie-Pokie Elmo's for Christmas last year and were lucky to be able to return one for a different toy.
Please, if you read this post don't take it the wrong way or think in anyway that I am unappreciative of the gifts our sons receive. We have very generous family and friends and I'm extremely thankful for the love they show our boys.
As for ideas, one of my sons favorite toys is a plastic bowling set he got that cost less than $10. He LOVES it. He also loves his Home Depot tool box (it said age 3, but I took out the small pieces). When he sees me or my DH with a screw driver or tape measure he runs to get his "ooo box".
Any toys that encourage thinking, sorting, and creativity are great. Wooden puzzles are fun. We have one that makes the animal sounds when you put the right piece in. Melissa and Doug make some cute ones.
Oh yea, the Crayola (I think) Color Wonder Markers are GREAT. They only color on the special paper so you don't have to worry about your wall or floor getting some extra color to it.
Have fun.
T.