This is by far my favorite animated film. (Okay, I do have a soft spot for Mulan, too.) The story is fanciful, even bordering on the bizarre if you take the cat bus into account. Two sisters, ages 4 and 11, are living in the country in 1950s Japan. Their mother is in the hospital with TB, and their father is a professor. The sisters develop a relationship with the local forest spirits, or totoro, who come to their aid when things go wrong.
Written and directed by Japanese legend Hayao Miyazaki, the character design and animation are breathtaking. Mai's character is imbued with the essence of little girl as she busily investigates her new house.
There are some tense bits to this movie, mostly when Mai (the four-year-old) gets lost. But everything ends happily; watch the beginning of the credits to see mom arriving home from the hospital.
Adults should also check out Spirited Away, and Kiki's Delivery Service is great for six and up.
Finally, for .25 a pop you can pick up a bushel of wooden acorns from Casey's Wood to make little tied-up packages just like Totoro's. I was going to make them as stocking stuffers but decided the acorns are a little small for my still-mouthy one-year-old.