I had a friend ask me awhile back what we do with Santa in our house. Personally, I think he can be fun. But we've never put much emphasis on him. My kids know who Santa Clause is, what he does, and they've seen most of the movies. But they also know that he's not real, and have known since they first knew what Christmas was.
I take the kids shopping with me when we pick up stocking stuffers. We talk about how Santa is fun to pretend and they help me find small items to put in each other's stockings. We just call it "playing Santa."
We also try to convey to our kids that sharing the truth about Santa is not up to us, but to the parents of our friends. We tell them that some parents like to "play Santa" by pretending that he's real and it's their choice when to tell their kids the truth.
That's not to say that my kids haven't let the cat out of the bag a time or two. Like last year when Lydia announced to the entire preschool art table that Santa wasn't real. And then again a few days later at lunch time. Luckily we went to school with some very understanding parents.
How do you handle Santa in your house?