Many couples will reserve a room at the reception venue for a babysitter to watch and entertain kids so their parents can enjoy the reception. Or you can also have the kids watched in a room at the hotel everyone is staying at.
I wouldn’t create a mini-reception for the kids with a DJ, but you can have a room with kid-friendly food, a TV with DVDs and video games. Make sure you have a babysitter to watch them. Having the kids close by means moms and dads can check in on them and if there’s an emergency the sitter can notify the parents quickly.
If you do decide to have the kids at the reception ask the parents before putting their kids at the kids’ table -- some may feel their three year old is better off with them then on his own. Tell the caterer how many children (under the age of 16) will be there so he can prepare enough kids’ meals and set-up the kids’ table with some activities. Coloring books or sketch pads with colored pencils will keep them busy, but don’t be surprised if they take over the dance floor.