What makes a great storytime book? There is no one right answer to that question; it depends not only on the group of kids in the audience, but on the reader as well.
Some factors are probably obvious. For example, with younger kids you would choose shorter books with fewer words per page. Older kids are going to be able to pay attention longer and follow longer, more complex stories and get more subtleties. Younger kids don't always get jokes, while older kids have a more sophisticated sense of humor.
Probably one of the most important factors that makes a great storytime book is that *you* like it. If you, the presenter, are enthusiastic about the book, it will come through in your delivery and the kids will pick up on it and will more than likely like it, too. Conversely, if the reader really isn't feeling it, then the audience probably won't either. What works for one presenter or one group of kids won't necessarily work for another. I have read books that I was cautioned might be a little long for my group, but I really liked and wanted to read, and lo and behold, they worked. And I have sometimes looked at a book someone else has used with success, and just knew it wasn't for me.
One example would be Froggy's First Kiss by Jonathon London. It was one of the books I was considering for my Valentine storytime for my 3 year-old daycare class, and my mentor felt it might be too long. But I really liked it and thought it would be a fun read so I decided to give it a go and if it didn't work, then lesson learned. And guess what, it worked! When I told them the title and they all went "Ewwww", I knew I had them. They laughed at Froggy staring at Frogilina and bumping his head repeatedly, guessed at what Frogilina's surprise for Froggy was going to be, and were totally grossed out by the kiss. So don't be afraid to trust your instincts!
Here is how *I* go about choosing my books for storytime. Sometimes a particular book will catch my attention and inspire a theme, sometimes I just decide on a theme and then find books to go with it, or just do several unrelated books I've been dying to do. First I screen for length, and look for bold, bright simple illustrations that are eye-catching (too much detail can result in way too many comments and interruptions). I also look for books that have some type of interactive element: questions to answer, sounds to make, objects to identify, colors to name, things to count, repeating lines the kids can join in saying, etc.
I tend to prefer books with a good rhythm and cadence. They seem to hold the kids' attention a little better, and they are easier for me to memorize. Rhyming or alliteration are nice things to include sometimes, too. If it also includes a concept, like counting, letters, colors, shapes, feelings, etc., that's a bonus. Pop-up books are always a big hit, so much so that I almost feel like I'm cheating by using them. I also tend to prefer cute, slightly funny books, though I have to be careful the humor is not too sophisticated or dark for this age. Others may prefer more sweet stories or stories with a message; everyone has their own style.
I generally start with 4-6 books and narrow down to the 3 I will use. I may be able to rule 1 or 2 definitely out or in after looking over them again, then once I actually try reading them out loud I can usually rule out another one. I can normally narrow it down to 4 pretty quickly, but sometimes have trouble making that last cut, and that's when you just have to go with your gut.