My motto.. Life's too short to knit with crappy yarns. There are so many to choose from if one doesn't suit you another one is around the corner.
For babies I usually use something soft and washable. I like Plymouth Jeannee or Berroco Comfort and use them a lot. I sometimes use Plymouth Encore as well.
For other things it varies on who it's going to, what it is, etc. I buy 99% of my yarn in my local yarn store. I like to support them when I can.