A novelty toy is a toy that is inexpensive and usually small and is designed for the amusement of a child.
A "regular" toy can be anything as small as a red fire truck to a hobby horse. Novelty toys are traditionally made of less expensive parts and/or can be simple to play with and can also be easier to break.
Some novelty toys are worth 100x's more later than a traditional toy where it held-up because the toy is made of better material. Old gum machine toys and plastic Cracker Jack items are considered novelty toys.