NEW YORK (CNNMoney.com) -- Parents, get ready. Toy Wishes magazine on Wednesday unveiled its annual list of this year's must-have toys for tots.

Among the candidates in 2006 - TMX Elmo, a digital camera for 3-year-olds, Princess Genevieve Barbie and a modern day twist to classic Monopoly.

Photo Gallery See more photos

The much-awaited annual "Hot Dozen" list predicts the most popular toys of the year just in time for the yearly ritual of fourth-quarter holiday gift buying.

The fourth quarter is typically the most important sales period for retailers, including toy sellers, and can account for as much as 50 percent of their annual profits and sales.

Industry watchers say toymakers today are increasingly challenged to make toys relevant to their iPod- and cell-phone-loving consumers.

Photo Gallery: Hot dozen toys

Over the past three years, as more kids shunned traditional toys in favor of consumer electronics like MP3 players and portable gaming platforms like Sony (Charts)'s PSP, toy manufacturers have responded to the threat by infusing more technology into toys.

That trend is again apparent in this year's hottest toy inventions.

For instance, Mattel (Charts)'s Fisher-Price division last month unveiled its most technologically advanced (10th anniversary) Elmo called TMX Elmo.

This new Elmo reacts to a "tickling" as soon as you turn it on. Its arms flap, and it falls to the floor, rolls around and stands back up again.

Jim Silver, a toy industry expert and editor of Toy Wishes magazine said Fisher-Price managed to break new ground in plush toys with TMX and predicts that there could be a shortage of the doll in the months ahead.

Also on the list is a digital camera from Fisher-Price that's custom-made for a 3-year-old.

Nintendo's new gaming innovation "Wii" made the cut, as did Lego's "robotic toolset."

However, there were a few classics in the top 12 list such as Princess Genevieve, the star of the Barbie doll's sixth princess movie "Barbie in the 12 Dancing Princesses" from Mattel and a modern-day version of Monopoly from Hasbro (Charts) called "Monopoly Here & Now" that features some of the most expensive real estate in the country including Times Square and Rodeo Drive.

Photo Gallery: Hot dozen toys

Top-secret Elmo revealed

Holiday 2006: Retail winners and losers

Stop 'n smell the gift cards

Jewelers sweat a 'Blood Diamond' holiday