The backyard sandbox is a classic fun area for kids -- there are endless play options, and you can get a wooden one or a plastic one with a lid. The next step up is a sand table, a waist-high table with a bin or bins that let kids stay relatively sand-free while still having the fun of digging. Some of these tables have drains so you can fill one side or both sides with water. (My daughter has one like this; one side also has removable bridges. There's even an umbrella for shade.)
The latest among the preschool set, though, goes beyond simple sand and water. Called sensory tables, they're designed to appeal to multiple senses and spark imagination. While they can be used indoors as well as out, many of the things you might choose to put in the table can be messy. Cleanup is much easier if you put the table out in the yard or on a deck. The simplest sensory tables are metal or wooden frames with one or more plastic tubs set inside. You can certainly make one out of an old coffee table. As for what to use in them, there are more ideas than I have space for. Food stuffs like pudding, gelatin, rice, oatmeal, beans and cooked spaghetti (sometimes with food coloring added) are fun options. You just need cups, funnels, spoons and other containers for scooping and pouring. Other things I've personally tried include shredded paper, shaving cream, homemade bubble solution, cornstarch and water, vinegar and baking soda. All of this is inexpensive and easy to clean up, and it provides hours of fun.