VTech - KidiArt Studion
http://www.vtechkids.com/product.cfm?productID=622

About VTech:
VTech, the creator of the Electronic Learning Products (ELP) category, is a world leader of age-appropriate learning toys.

Product Review:
I received KidiArt Studio from VTech. A great gift for ages 4-7 years. Show your kids just how creative they can be with a high-tech creative tool. KidiArt Studio easily connects to a television or PC so little artists can show off their projects for all to see. With KidiArt Studio, kids can take basic drawing and art lessons, create a full array of printable posters and cards, or make a family tree using real pictures! Use the digital camera conveniently located on the arm of KidiArt Studio to make stop motion animations. Also, when in PC connect mode, your child can save their creations, create custom e-Cards for friends, and print anything they've made. Connect your kids to creativity with the KidiArt Studio. Only requires 4 AA batteries.

This is what it looks like before putting it together. I know it looks confusing but i reality it is extremely easy to put together. No tools are needed. It took me all of 5 minutes to assemble it in its entirety. 

Here is the real scoop - my 3yo and 5yo just love this. It is a toy that is played with daily in my house. It took a few days for them to learn all the ins and outs but once learned there was no stopping them. It is very user friendly. The pictures aren't the greatest quality but are still pretty good for a children's toy. There is no flash so they do need to play with it in a lighted room. This item is a bit pricey at $79.99 but well worth the price. I will admit I was a bit skeptical at first but when I saw the fun they were having I was convinced. Even my 16yo was playing with it. That alone should tell you something, lol.