When my kids were little, they ofcourse had toys...however, because we had several children, I noticed very early on that they tended to play with each other much more than they played with actual toys.  As to the claim of "educational toys"...well, I think any toy can serve this purpose.  I've seen my kids take small toys and play out all sorts of scenarios with them.  To me, that is educational...I don't begin to believe a kid can be "educated" by a talking toy.

I will say, however, that my younger kids did use a computer program a lot that truly fostered their letter and sound recognition...trying to remember what it was called, but it was very simple.  Very Sesame Street like in that it just showed letters and made funny sounds demonstrating the sound they made.  This means nothing, however, if the parent doesn't take it to the next step and help the child put this into day-to-day use.