Well.
The PCs have a wish list- I tell them only to put on the list stuff they absolutely want, and only one item per level- for approx. PC level +5- so a level 1 PC has six items, one each of level 1-6. I get them to update this a set times, basically they get to update the list every 3 levels, or so.
The PC who gets me his or her list first, or updates first, gets first magic item- and so on... second, second etc. Each item is worked in to the story, even if only minor story type stuff, I only give out items PC level +3 Max generally.
I distribute two Magic Items per level (all PCs level at the same time).
Common Magic Items are available of course, but they take time to craft and residuum is rare, so other than Potions of Healing, and minor stuff etc. there's generally not a lot available at low level.
The guys can pick up a +1 weapon main weapon/implement or whatever but they forfeit their next magic item from their lists- if the games hard going then I let it be known that they can get magic armour, or other stuff.
In game (new campaign) the PCs are level 2, so-
Morok, Dwarf Battlerager, recovered the Magical Craghammer of his Clan, having bested a Mercenary Dwarf leader to rest the item from his cold dead hands.
Ayumu, Elf Psion, defeated a Goblin Wizard, second in command of the Black Tongue Goblins to claim a Magical Orb which had been whispering to him (although he was not aware of this) for the last session or two- drawing Ayumu closer, the Orb will have a backstory too- when Ayumu finds it out.
Destructorr, Warforged Fighter, if tonights game goes to plan, will be gifted the ability to transmute his right hand in to a magical aftershock battleaxe- basically the fingers join together and then fan out in some mad transformer style. He will be gifted this by a Lich... Yeah, I like to mess with the guys, the PCs will also receive some new info which will certainly leave Destructorr's player wondering who his character really is.
I figure magic items, even the lowly +1 Sword, should have a bit of depth, they should get a name- even if it's only the name of the guy they slew to get it- the PCs often name their items- Goblinslayer, is just a +1 sword that was there for two natural 20's etc. and thus the legend of the sword is born.
That is all.
Cheers PDR