When my boys were little, I was very fortunate to have a whole room that could be used as a playroom. My only regret is that I didn't have a good design plan in advance, so it ended up becoming a large disorganized pile of toys! If I could do it over, I would design the room with better storage as well as play in mind.
No matter what the size of your playroom - whether it's a whole room or just an area in another room - think of how preschools are set up, with areas for pretend play, crafts, and more active activities. The latter is best done outside, but with a large enough room and some soft flooring, you can add small sliding boards, climbing walls, and other play equipment. Even a large mat where kids can just dance or jump around is a good choice.
Make sure toys have a home and that they are easy to put away. Toy boxes and canvas bins make cleanup fast.
For pretend play, use play kitchens, play tables, toy workshops - whatever appeals to the children who will be playing there. You can set up areas just like a miniature house, with a kitchen, workshop and quiet area, for some examples.
Flooring should be soft for little falls, but also easy to clean and maintain. Carpet squares and vinyl flooring are good choices; the first is easy to replace if necessary, the second easy to clean. The floor can have added softness and pops of color with soft, shaggy rugs.
Since most toys are colored in bright primary colors, they usually coordinate well and there is little need for further decorating. Walls can be plain white, or perhaps a brightly colored accent wall, a wall painted in chalkboard paint, or stripes or dots painted on the wall. Use maps, letter charts and other educational art for further decoration.