There are many milestones in a child's life: potty training and the joy of "big kid pants" instead of diapers, walking (followed soon by running), graduating from baby food and the high chair to the Real Dinner Table. For many children, add reading to that list.
Even with the rise of e-books, there's nothing like the look in a child's eyes when they're holding a real paper book in their hands for the first time. It's something they can actually take with them; with Kindles and the like there are still worries of loss or breakage, and replacing the device is expensive. But an actual book...kids can draw on the pages, or get cookie crumbs in the binding, or even leave it out in the rain and as long as it's not a library book no big deal.
A good children's bookstore also serves as community center; adults can gather together and share recommendations or issue caveats about certain books, children can come for story time to give the parents at least a small break, and aunts/uncles/grandparents can find a gift for that special little someone in their lives. And just because a book is written for children doesn't mean that it's not worth reading by adults (the Harry Potter series is just one example); as English novelist Mark Haddon has said:
Writing for children is bloody difficult; books for children are as complex as their adult counterparts, and they should therefore be accorded the same respect.
Here in the San Francisco South Bay Area, we're fortunate to have two bookstores that are dedicated to children's books -- in this era of diversification, they also carry toys but books are still their main stock in trade.
In Los Altos, towards the northern part of Santa Clara County, there's Linden Tree Bookstore. Started in 1981, the store provides not just access to books, but also concerts, reading times, and summer reading camps. You can occasionally find the adult treasure as well; on one trip past there we came across a copy of Mark Twain's autobiography on the outside sales rack. And it's on a nice quiet street so while your kids are inside listening to a story you can sit outside when the weather is nice and have a nice adult conversation.
In San Jose, Hicklebee's Children's Books is definitely worth a visit if you're in the area (say, if you come in early for Netroots Nation, hint hint...). The entire shop is a museum of sorts, with artifacts and treasures inspired by the books housed within (some even from the books' creators, such as Ann Brashare's Traveling Pants and the cupboard from The Indian In The Cupboard). And the store specializes in trying to locate books from childhood that might be out of print or hard to find...there's nothing better than to be able to introduce a book to your kids (or nieces/nephews, or even grandkids) that brought you joy in your youth...or to read it again and see if it stands the test of time.
In the comments, please share any treasures you may have found -- bookstores that have served as a haven for you or your children in childhood, or places that have helped you introduce the love of books and reading to the young people in your life.