Well...since I don't have kids I can only speculate and go by what my friends say who have very young children.
I'll give you a very very small example of a recent conversation I had with a friend.
My friend was looking into buying a new bed and mattress for her daughter since she has out grown her toddler bed and asked what I thought about some of the bedding she was looking at for this new bed and mattress. Of course she was looking at the matching sets with the pretty print that came in a set like a bed in a bag type deal. She complained about how insanely expensive everything was. First I asked if she tried Target because you could get something pretty for a cheaper price. She said the fabric is not soft enough. So, that was not an option. I said, well, you know she won't know any different. If you just bought the bed sheets separately and used the comforter she already has then you would probably save about 1/2 the money and you'll be able to buy better quality bed sheets. She said that the whole point of getting the set is because every piece has the pretty print and it all matches. I said, I'm just going by the fact that when I was little my parents didn't have money to buy matching sets and in the end it didn't really matter anyway because it's just something to sleep on. She said, well that's the thing. I didn't have all of those things either so I just want my daughter to be able to have what I didn't have. (sigh... Not much more I could've said after that. I knew it would be a dead end. But also in a way I could understand her thought process there.)
To sum this up.....
It makes us happy to be able to give to our loved ones what we are not given or were not given not realizing that in doing so we are not giving them the chance to go through the hardships and humbleness which is what made us appreciate what we have given ourselves through hard work and perseverance. But I also think this is a double edged sword because you want your kids to feel somewhat entitled but you want that entitlement to be the driving force for them to strive for that "good life" and not just settle for what's enough. And I also think that the "working parent's guilt" has a big hand in constant gifting and giving in to unwanted behavior. But that part has already been covered in the other posts.