Give away to various groups: From Children's hospitals, to mother and toddler groups, places that rely on the kindness of others can always do with an influx of new toys. Charity shops will also take old toys provided they are in fairly good nick. It's always advisable to give them a good spritz with anti bacterial spray before hand too, especially in cold and flu season.
Make-do and mend: Not just for the war time generation, learning to sew well means that you can repair and patch up some well worm out toys. Your kids will thank you, especially if the toy in question is a comforter or favourite of theirs.
In the case of material toys and stuffdies, when you can't mend, re-use: Fabric from old toys can be reused in patchwork pieces, in craft boxes, as Christmas decorations and present adornments, to name but a few. Keeping things like eyes, zips and buttons is also useful as they may come in handy for repairing other toys in the future, as can the stuffing.
Pass on to the next generation: Be it future brothers and sisters, cousins, grand children or someone else you know who has is expecting, offer up your old toys. You could even organise a toy exchange as you can never underestimate the interest a child will have in another child's toys, even if they have seen better days.
Sell on eBay: Who knows, that sticky action figure you no longer need could be the crowning jewel in some fan boy's collection, and it you miraculously find yourself with something not only much sort after but also in good condition, you could be quids in.