With ds2 (7), smaller kits and general lego pieces all go in one huge basket and he uses them to make all manner of weird and wonderful creations. He likes getting smaller kits he can make then dismantle, as its a way of getting hold of more interesting pieces to use in his own designs. He also has an impressive collection of minifigures that he likes to mix and match, often to comic effect. 
Ds1 (9) doesn't create unique things, because he has AS and struggles with the imagination involved. He does love his kits though and is very methodical about putting them together. His smaller kits are kept in tupperware along with the instructions so he can build them again if he wants to.
Both boys have some kits that they are very proud of (mainly because they were particularly complicated to build) and those go on their Lego shelves, they each have a shelf above their bed especially for this. Ds2 also puts some of his better self-designed creations up there from time-to-time, generally until he needs to cannibalise them to use the parts in one of his newest designs.
All three of my dcs (dd is 2) play with our megabloks on a regular basis. They like to build giant towers or dens with them - having said that, we do have a ridiculous amount megablok bricks, which makes it a bit easier to build constructions of impressive scale.
I think it depends on the individual child as to what they are going to get out of lego. Obviously my boys use it in very different ways, but they are both huge lego fans and get a lot out of using it. Ds1 likes to store his carefully and re-use them, ds2 likes to mix it up and do his own thing. They share a bedroom and yes - this has caused plenty of fights between them in the past, but now they're old enough to respect each other's property a little better they both just get on with doing their own thing and playing with their own lego.