If it's something small that they're caught playing with (like a toy), I take it away and return it at the end of the day.
If it's something major (IPod, Cell Phone, GameBoy, jewelry, etc.), it goes to the office where it's kept in a locked locker in the principal's office until the end of the day. At the end of the day, it's returned to the student. Note -- jewelry, unless it's of the religious variety, is not allowed in my school. Girls will wear an expensive ring or bracelet and they have to leave them in the office. Necklaces can be tucked into their shirts.
What if something's stolen from my desk? Well, I haven't had that problem. I guess that's one bonus of being a Kdg. teacher. They only bring in small toys and nothing major! However, I did have a student bring in Mommy's diamond ring for show and tell!!! That went straight into the locker and Mom was called so she knew where the ring was.
However, in DS's school, although they aren't allowed, a student brought in a GameBoy. Someone took it and the games. They requested that the "culprit" turn it in. When nobody did, the principal went through backpacks and found it in one child's backpack. The child confessed to stealing it.