I think that the best family holidays are ones where there are plenty of interesting things for each family member, from the youngest child to the oldest grandparent, as well as things that will be of interest to everyone. There should also be plenty of time to spend quality time talking or doing things together that aren't generally possible in everyday life. Otherwise, it doesn't really matter where you go or what you do.
It's nice to plan different kinds of holidays too. Family camping is a favourite of mine, as it's active, adventurous and fun. Overseas holidays are great too, though, as it's good for children to learn about and respect other cultures from an early age. Houseboat holidays are also very enjoyable, although probably only suitable for families with sensible older children.