Well, kids like bags of crap so I don't really see it as the end of civilization or anything. My daughter stays quiet on the way home while rooting around in the bag, so that makes for a pleasant ride home. By the next day, most of the stuff has been eaten, broken, used or tossed. But we still have some stuff from a pirate themed party she went to last year and a little carry basket from a "spa"-themed party she attended. That was actually pretty nice.
One year, I gave out nice balloons to the kids (that was popular). This year we are having a pool party at the local high school swimming pool, so I have gotten "pool" and "beach" stuff. We are inviting A LOT of kids (she's turning six so it is time for her one "big" party) so I went with cheap squirt guns, small inflatable beach balls, pencils with beach themes and, gosh, I can't remember everything. (The box, from Oriental Trading Company, is stuck under my bed right now.) I probably won't put in candy. So maybe 4-5 things in each bag.
We've been to parties without the favors and that's okay too. It is sort of fun to see what kind of things people decide to give.