I actually use a tiny drawstring pouch I got at a jewelry store. Ben puts his tooth in it under his pillow and then I fish it out and put the $ and a pinch some fine glitter "fairy dust" and replace it under his pillow.
He has a tooth plushie, but when the time came I really thought it would be more fun to continue the tradition the way I grew up... putting the tooth under your pillow.
BUT>>> when DD loses her first tooth I can totally see her loving a special plushie for it. She's into that kind of thing. And I don't think I'll be able to sneak anything out/in from under her pillow. She's a light sleeper!