You might not be into soft toys, but Cuddly is a brilliant lateral thinking use of a mobile phone's sensors to create an animated toy.
The idea is simple. You place a mobile phone inside a soft toy and program it to react to a squeeze - hence the name Cuddly. The child is supposed to cuddle, pet or stroke the soft toy to get a sound played or even something to happen on the screen.
The idea may be simple but how do you get a phone to sense a cuddle?
If you are thinking near field or proximity sensors you are way too complicated - and I have no idea if they would work. What does seem to work well is the method invented for the Cuddly app. The idea is that you switch on the phone's flash and use the camera to measure the amount of light it can "see". With the phone surrounded by soft toy stuffing the amount of light back scattered to the camera is a function of how dense the stuffing is i.e how much it is being squeezed.
It's an "I wish I'd thought of that" idea.
Take a look at the video of it in action, which explains how it works:
The big limitation with the approach is the restricted range of things the phone can do in response. It can clearly make noises and the phone's vibrator might be able to come into use - but in both cases the stuffing might be a problem. Also, the example of playing a game requires the top part of the phone to be uncovered which isn't particularly natural. You could add devices to the phone but this would spoil the simplicity of the 100% software solution.