This was a private school that didn't offer financial aid, and the tuition was a hardship for some people (we definitely wheezed our way through our last year there).
I've read here and there that the teachers aren't necessarily wild about the practice, either (comments from teachers out there?).
Val
This was our identical experience last year. We were told that after paying a ridiculous tuition, the teachers' salaries were still low and we were supposed to supplement with holiday and end of the year gifts. I hated it. Why not just raise tuition some more instead of have a weird favoritism thing? Plus the specialty teachers usually did not receive "thanks" despite being lower paid and generally more highly trained.
The teacher in me doesn't mind small gifts- a $10 coffee card, a set of new dry erase pens. One year I had a family that gave me a $500 Amazon card and expected that they were going to get $500 extra in service. Teaching is not a fancy restaurant... I used the money to buy books for my class. They were very unhappy at the end of the year and even said to my boss "we bought her a fantastic present, assuming she'd be more available for us." Yuck.