The industry has reason to be at least mildly optimistic. According to Port Washington, N.Y.-based NPD Group, toy sales dipped only 2% last year, to $22.1 billion in sales, despite a slack economy and recalls of Chinese-made toys covered with lead-impregnated paint.

Losses were offset by sales of action figures and accessories, which were up 8%, per the consultancy. The biggest losses, not surprisingly, were in infant and pre-school toys, which slipped 5%; outdoor and sports toys, also down 5% and dolls, sales of which dropped 8%.

Toy trends in evidence at this year's show: Web toys, licensed toys, educational toys and toys intended to teach kids about being green. San Francisco-based educational-toymaker LeapFrog used the show to bow 14 new Web-connected titles for its Leapster2 handheld system and for the Didj Gaming System. The toys center on licensed characters from Cartoon Network, Lucasfilm Ltd., Nickelodeon and Warner Bros.

Disney Online unveiled its latest virtual world. Disney Fairies Pixie Hollow, an online environment--kind of Second Life for kids--comprises homes scattered about idyllic hills and vales. Also unveiled was a series of Disney Fairies Internet-connected toys. The products are meant--like the popular Webkinz toys--to connect the Pixie Hollow virtual world with the real world.

In the Pixie Hollow world, kids create mystic avatars of themselves, interact with others, go on virtual quests, play games and make virtual jewelry and clothes, at DisneyFairies.com.

The company says the first phase launches later this year. Last year, the Disney Fairies franchise generated more than $800 million in global retail sales, and site visitors have created around five million virtual Fairies, per Disney.

According to NPD, connected Web toys are a growth segment of the toy market. "Connected Web play toys, which marry a physical toy with ongoing digital play opportunities via the Internet, is a relatively new phenomenon that we've seen emerge within the toy industry," says Anita Frazier, industry analyst, The NPD Group. "Thanks in large part to the popular Webkinz brand, this type of play is expanding into new categories and across many properties."

Among the green themes is Matter Group's trading-card game Xeko. The newest game--and the company's fourth in two years--is Xeko Mission: China, an eco-adventure game the company says it will debut at the same time as the 2008 Summer Olympics in Beijing. Xeko involves collecting animal-species trading cards to create one's own "Xeko-system" with which one plays math and science games based on ecosystem relationships.

The big sellers last year, per NPD: Barbie, Bratz, and Cars: The Movie; Crayola and Dora the Explorer. The firm says the brands experiencing the largest growth were Air Hogs, Hannah Montana, Transformers and Webkinz. Much of the activity was in toys reflecting licensing deals with entertainment properties: 27% of total industry sales comprised licensed products from Disney Princess, Cars: The Movie, Dora The Explorer, Spider-Man and Star Wars.

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