Splish - Splash - Splosh - As with all books written by Shirley Hughes, this is an excellent book which my 3 year old son really enjoys having read to him time and time and time again and so does dad.
We have all the Alfie, Annie Rose and Olly & Me books and can't recommend them highly enough. Shirley Hughes's writing is funny, endearing with recognisable stories. Her wonderful illustrations are little pieces of art, each and everyone. Nobody can depict the essence of young children the way they are, like Shirley Hughes.
Shirley Hughes's Nursery collection is excellent for under 3 age group.
I would also like to recommend the Katie books (Sunflowers, Mona Lisa & the Impressionists) by James Mayhew. Because of these books my 3 year old son loves going to art galleries to see the actual pictures.