The Big Money's history of gift cards is a fascinating timeline of how they spread like a virus, infecting every gift-giving tradition we hold dear: Neiman Marcus actually was the first to sell gift cards, in 1994, but because the retailer didn't quite understand their potential, the cards were kept out of sight and sold only as a novelty item. Blockbuster was the first to display them, starting in 1995, which was the true beginning of the gift card revolution.
Starbucks was the next major innovator, in 2001, with gift cards that worked more than once, so you'd have to keep going back. (Today, one out of seven purchases is made with a gift card at Starbucks in the US.) Which brings us to the present, with gimmick cards like Best Buy's tiny speaker or Target's little camera, or purely electronic ones, like for Steam and Amazon.
Did your Christmas feel more empty and hollow this year? Did you give or receive a gift card? Bingo. Gift cards are the most cynical of all presents, lower than cash. They lock the receiver into a particular store or service, while relieving the giver of any responsibility, thought or feeling. If someone gives you a gift card, they don't care about you. In fact, they're trying to trick you, and make you think that they do, because they took the time to select a store to purchase your piece of plastic from. That is a lie—the effort went into the ruse, not your gift.
Of course, stores love gift cards, a pure token that holds no value after it's purchased, except that which the merchant dictates. Odds are, when somebody comes in to spend a gift card, they'll use to buy something more expensive. Even if the gift card is never used, the store still keeps the money—and most unused gift cards lose value over time, withering with the seasons. It's an $87 billion con by the retail industry, and Americans, obsessed with convenience, have eaten it up.
If you're thinking about buying somebody a gift card because you can't be bothered to pick out a real present, don't. Give them cash. Sure, you might feel like an asshole—well, you kind of are—but I promise you, the person receiving the wad will like it a whole lot more than any gift card. Cash can be spent, anytime, anywhere, and it won't expire in a year (unless the economy completely collapses, then we've got bigger problems than declining gift standards).
Update: I forgot to make the important exception for independent and local specialty stores, like record shops. Gift cards are okay in that case (small businesses need money, speciality stores require some consideration).