I've seen some variations on this idea (links below). Basically you get a stuffed elf and hide him/her around the house for the kids to find. Sometimes the elf even gets into mischief. This is a tradition I want to start this year with my family. I think my girls would really like it. And I think hubby would have fun thinking up things for our elf to do.
Santa's Magic Elf
Elf Magic
Hooray for Elfie
The Magic Elf
Elf on the Shelf