I know loads of people have replied on this, but I thought I'd chip in as well. I have lots of friends requesting things from me. For close friends who really want something in particular, I'll ask them to cover the yarn, any time, experience and other cost-related things are free of charge, though within reasonable limits.
I also have a good friend who wanted this scarf from the Doctor Who show (it's about 9 feet long I think), he covered all of the yarn cost and said he'd give me 50 euros (60-70 dollar?) for the time and effort I spend on it. Which I do think is only fair.
It really depends on what you knit for them. Scarves take a while (if knitted on a small needle), but are fairly simple and don't need much attention to knit. Big sweaters and other weird, extravagant things will cost you more effort, time and attention, so that means it's not unfair to ask a small fee for that....Especially cause most knitters have so many projects of their own as well
Though of course, christmas is a good time to knit presents for people as well