We're waiting for my friend to have her third baby at the moment. For someone who was told 5 years ago that conception was unlikely, she's done pretty well so far with a boy and a girl, and now we are waiting for another boy to arrive :) In amongst all the other bits of knitting I've done recently, I've been making small things for the baby. A set of baby clothing is called a layette, but that's a term that doesn't seem to get used much these days, perhaps because relatively few women make the clothes their babies wear in the first few months after birth.
So what do you put in a layette? Generally it will consist of vests, pants (often known as soakers in America I believe), all-in-one babygro or bodysuits, leggins, jackets, and the usual mittens, booties and hats / bonnets. You can add a blanket if you have time. The key is to use patterns and styles that allow the baby to be dressed with the minimum of pulling of arms and legs, and that allow nappies (diapers) to be changed without removing the whole garment.
I've done 4 pieces so far, and I'm about to make a couple of pairs of pants as the baby will be in terry nappies during the day at home.