The current annual exclusion for gifts (actually to avoid gift tax, not income tax) is $12,000 per recipient. If you are married, your spouse and you can combine your exclusion for a total of a $24,000 gift per recipient.
Your are right that the annual gift tax exclusion used to be $10,000. But it increased to $11,000 in 2002, and then $12,000 in 2006.
You are able to use a separate exclusion for each child. Thus, if you have three children, you can give each child $12,000 per year.
You can also use this gift exclusion for unrelated persons. Thus, if your child is married (or in a committed relationship), you can give a gift of up $12,000 to the child’s spouse (or significant other).