Cross-posted from Geeky Traveller.
When travelling, I’ve always felt sheepish about taking photos of other people, especially children. You obviously don’t want to exploit them, or treat them like animals in a zoo. On the other hand, it strikes me as kind of tacky to give them money (though poverty trumps tackiness, so I’d probably give them cash in many developing countries)
Regardless, I recently read (somewhere, maybe in National Geographic’s Traveler magazine) a great tip for photographing the locals while travelling. Bring along a Polaroid camera (even something simple like this iZone 200). Take a photo of your subject with that camera first, and give them the polaroid as a little gift. Then take photos with your own camera. Then you both get a keepsake of your meeting.
DarrenBarefoot.com 
It probably goes without saying but if you’re taking pictures of kids somewhere other than the third world — and probably there too — find their parents and ask first.