A new board book that has physical participation is The Finger Circus Game by Herve Tullet. Tullet is a French author/illustrator, I found this interview here to be very informative.
In this book, it's all about the famous worm circus, you put your finger in the hole to be the worm and work your way through the story. It's a hoot! I predict Moms, Dads, older brothers, sisters, and toddlers will love to be the 'worms' in the story. And although this is a board book, it is so interactive that all ages will enjoy this. So come on, draw eyes, nose and a mouth on your finger and get to the circus.