One of the first things we noticed about our home when we moved here is that the yard has an oddly placed circle of pine trees in the corner. I have no idea what the original garden-planner was intending for these trees, but I was immediately drawn to the room created by the branches. We started calling it the fairy garden, based partly on the 'fairy circle' lore, but also based on a delightful memory I have from my babysitting years (long, long ago) when I had the honor of working for a family who had tiny houses placed throughout their home...for the fairies.
Now we keep our eyes peeled for tiny things that the fairies can use as homes. Birdhouses work well, like the yard sale finds above and in the branches below, and each year the kids try to make houses from sticks and other natural materials.
The home-made houses usually don't last more than a few months, but the act of building them is the best part.
We also add things to the garden for our own amusement, such as the old elf statue, stepping stones and toadstool seats.