As you may have been able to tell from the pictures I have posted, Meg and Clare love to dress up. At home they are almost always in dress up clothes and away from home they often sneak some dress up items with them. I recently noticed in our Christmas pictures that Clare had taken the time to put on a tiara before coming downstairs to open Santa gifts.
Recently I have read many resources inspired by the Waldorf educational method. While I don't know enough about Waldorf to speak to its merits, I do like the idea that toys need to be tools that inspire imaginary play that is led by the child, not the toy. For example, blocks that can be built in just one way (a way dictated by the manufacturer) would be much less desirable than a set of blocks that allows a child to use his or her imagination to create anything. Dress up clothes are best if they are just simple pieces the child can use in whatever way he or she wishes as opposed to a specific princess or other character. After all, kids can create some seriously awesome combinations.
I can't tell you why in child development terms all of these games of imagination are important, but I strongly believe that they are. Perhaps they expand creativity. Perhaps they help kids make sense of the world. Or perhaps they just let kids be kids.