I camped mostly when my children were young, but I can tell you that they loved the experiences. Here are things I know regarding camping that may also translate well into backpacking....

We usually had a hammock for swinging in (they loved those!), and they also loved playing with their little cheapo flashlights & walkie talkies.

The whole trip is a fun learning experience: we talked about fire/outdoor safety, leave no trace philosophy (made a game out of keeping campsite cleaner than how we found it), animal behavior - they especially loved chasing chipmunks and viewing bunnies and deer up close. (lol, I wish this thread allowed me to upload a photo of my boys then age 2 & 3 1/2 hanging out w/deer)

A cozy tent equipped with wall to wall padding & sleeping bags makes an amazing playpen for little kids/toddlers/babies. I vividly remember them happily squealing with laughter as they squished their faces against the screen net to laugh at us silly adults outside. They were happy they could see us, play in their little "play house" and burrow into the sleeping bags only to emerge a few seconds later with their hair all electrified with static. I packed their little backpacks with travel sized and miniature toys/games and they entertained themselves for hours in the tent with those. Some benefits of keeping all toys in the tent is that we could always find all the pieces again if they should slip under a bag or something.

Kids can learn to enjoy all sorts of things: stargazing, fishing, they can help set up tents and other equipment, they can help cook. They can even help carry some of the lighter things and they feel a sense of pride in being able to help out.

My dad took me and my sister camping when we were little, I continued that tradition with my boys, and now I look forward to having grandkids one day and bring them along as well =)