Drop the hanky, or drop the handkerchief, is a traditional children's party game that's been around for generations. It's so simple that even toddlers will be able to learn it quickly and play with the big kids.
Have the children form a circle and stand facing each other.
Choose one child to be "it" by drawing straws or guessing a number. The child who is "it " holds a handkerchief or a piece of cloth and begins running around the outside of the circle.
Wait for the "it" child to eventually drop the hanky behind one of the other children, whereupon he will take off running as fast as he can. The child behind whom the hanky was dropped must pick it up and run after the "it" child to try to catch him. The "it" child's goal is to run completely around the circle and get back to the open space before the child with the hanky does.
Watch for the child with the hanky to catch the "it" child; if she does so, the "it" child must be "it" again, and try once more to get a spot in the circle. The game can be played for long as the children remain interested.
If the children are of various ages, ask the older ones to run slowly, to help level the playing field for the younger kids.