As a DM I don’t really have a favorite magic item. For some reason when I’m not using random tables I tend to choose magic weapons other than swords so maybe those are my favorite. I especially like weapons that are dedicated to killing a particular type of foe, because it kind of makes sense to me that someone with the ability to magic items would make them with a purpose in mind.
As a player, I’m always happy to get whatever I can so I can’t really say I have a favorite there either. A ring of invisibility was the most prized possession of my half-orc fighter-assassin for obvious reasons, but I am a bit of a heretic about magic items in that I always prefer something that lets your character do something he couldn’t otherwise do rather than something that just enhances his existing abilities. This might be part of what I dislike about WotC editions of D&D — you really need to have items directly related to your skills and powers to “keep up” with the CR curve. I’d rather get a useful miscellaneous magic item than a +1 sword for my fighter… come to think of it I guess my favorite type of magic item is the miscellaneous type.