Good Places to Shop:

I have found stores such as The Right Start, Learningsmith, FAO Schwartz have the best quality and better selection.  There are also great stores in the Bay Area such as Kiddie World (San Jose).

What To Look For:

Books made of cloth or harder cardboard are great for infants to look at and chew on.  Favorites include anything by Eric Carle.

For toys, make sure they are suitable for a baby 1 year or less.  I don't recommend the Lamaze line of black/white/red toys as those toys are really best for preemies (who don't see colors as quickly as full-term babies).  It's a misuse of good research (to quote my mother).  Go for the bright colors!