I use small lengths instead of ribbon on packages. Especially cute with thicker yarns, really colorful variegated, shiny ones, etc. You can wind two strands of different yarns together, too.
I sometimes use a flour sack towel that I have embroidered on as the wrapping and use nice bulky yarns as the ribbon. That way they actually get two gifts.
A friend of mine who has a knitting machine said she made I chord with Christmas yarns (but red, green, white, gold, etc. would work too) and she put them on packages. I'm doing a hand knitted I chord and it's turning out really cute!