Admittedly long-winded, but in the sake of sharing helpful info...
Since we live thousands of miles from most of our family and longtime friends, we often take airplanes and I'm always on the lookout for kid travel tips. I've written several blog entries about airplane travel with a baby twelve months and younger. (Click here to see 'em.) Some of the tips will still be helpful, yet traveling with active, inquisitive toddlers is often a different ball game. Here are some ideas that helped with our Hawaii trip (five hours, three time zones) while Eli was twenty months old. He did fabulous on the plane both outward and homeward. Whew!
If you have ideas for keeping kids happy in planes or cars, please share! (I'd especially love ideas that will help us as Eli gets older.)
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I definitely tried to pack a few familiar favorite toys, but I also brought new (but cheap) things that were interesting because of novelty. As soon as we got home, I hid the new items away to use again for our next trip. (And to make new items even more interesting, you can wrap them so kids have the fun of opening them.)
Eli loves his Duplo Lego, but we didn't want to risk losing expensive pieces. We packed a few cheap Megablocks instead. For a while Eli's interest was waning in his Parents brand (Battat Toys) key set that makes four sounds and has a flashlight, but now it has a new life because he loves make-believe driving, which is easy to do on a plane. The Sesame Street Silly Sounds remote control (Fisher-Price) offers a lot of amusement in a small package since each button makes multiple sounds and it teaches numbers. (Most electronic "beepy" toys aren't noisy enough to be heard by other passengers over the roar of the plane.) Then we also carried several Viking vehicles for driving along seat backs and arm rests and tummies. I put ribbons on everything (except the Megablocks) so we could tether them to Eli's car seat or the airplane seat belt.
We also carried stickers. Eli didn't seem very interested in stickers...until I found some with trucks and cars. He loved 'em! Cutting the sheets of stickers into strips means you can offer the stickers a little at a time and keep a tot's interest longer. We also carried triangle-shaped crayons (easier for little fingers and they don't roll) carried in a Rose Art brand zippered, cushioned crayon pouch to prevent breakage. Instead of loose paper, we carried miniature composition books that offer a firm surface and fit in a pocket. Eli wasn't interested in drawing by himself for very long, but he loved it when we would draw animals and objects he knows. We also drew on his magnetic ever-erasable Fisher-Price Travel Doodle Pro with the built-in pencil. 
Books are always good, but tot board books are thick and heavy. I found cheap thin ones in the Target "Dollar Spot" that were actually pretty interesting, full of photos of animals, vehicles, and such. The Crayola series is my favorite because there are tons of pictures per page, so there is a lot to talk about with a tot.
I think Eli is finally winding down on his V-Tech brand camera and electronic storybook. But I always tell other parents about these because Eli loved them so well and so long. From 12 to 18 months, Eli played with the Interactive Learning Book almost every time he got in his car seat. These are great travel buddies. 
The cheapo toy below was only $3.29 at our local Lucky grocery store, but was the big hit of the flight. Because we were right there with him, Eli could play with toys that wouldn't be safe enough just to drop into his toy box. This one is a flash light with fiber optic filaments and it blinks different colors. Ooooeeeee, this brought tot excitement!
Last but not least, I always travel with a new box of ear plugs to offer my fellow passengers if Eli gets out of control. On all of our fifteen flights, we've gotten nothing but compliments on his behavior, but it is nice to have a small gesture of apology if all else fails. (Thanks for that idea, Jennifer!)
Keeping a tots amused for hours of travel is one problem. Carrying lots of gear is another. We brought Eli's lightweight MacLaren Triumph stroller but we also needed to have a car seat. (You can rent one at your destination, but I'd heard horror stories of outdated, dirty, and/or broken seats.) My friend Birgit gave me her daughter's hand-me-down Go Go Kidz Travelmate that turned Eli's car seat into a second stroller or, at other times, a mini luggage cart. It was very helpful and Eli was amused by zipping down the concourse. (Thanks, Birgit!)

An alternative to the Go Go Kidz is this Tote A Tot contraption that functions as a tote bag but also attaches your car seat to a rolling suitcase. (Thanks for the information about this, Karen!) Note: If you are taking your car seat on the plane, look on the side of it for a sticker that says it is FAA approved. If it isn't, the flight attendants won't let your child sit in it for takeoffs and landings, so you'll most likely have to check it at the gate.
Our friend Karen also told us about the CARES harness for kids (22 to 44 pounds). This is great especially for short flights or if your kid won't nap in a car seat. It is the only harness approved by the FAA and thus the only one allowed during takeoffs and landings. It is a little bit pricey, but worth it for safety's sake since you never know when turbulence will strike. And there was one thing we discovered that made us a little less eager to carry Eli's seat on the plane.... Eli's car seat functioned somewhat like a booster seat, raising him up and putting him several inches forward. That meant he often spontaneously kicked the seat in front of him before we could grab his feet to prevent it. On the way to Hawaii, Eli sat behind the sweetest and most patient preteen boy I'd ever met who simply laughed whenever Eli kicked. I can only imagine most passengers wouldn't be so cheerful about it. On the way home, we paid extra for bulkhead seats! But the harness instead of the car seat would prevent this problem.
Happy travel means arriving happy and getting back home happy! A little planning and a few careful purchases made a big difference. Local mama friends, we're happy to loan out our travel toys and/or gear, so just ask before your next trip.
Happy Travels!