I'm not sure if it's making something up as I go along, and I have to admit that it's something that I have gotten better with over the last several years of telling bedtime stories. I find that it's always good to recount the events of the day or week but change the names to protect the innocent.
Using some of the same stories over and over with slight variations is also a good tactic and as I think about it, something my own father used with me when I was young. Kids enjoy hearing stories about characters that they know and love.
What stories do you remember from your childhood? If you are a parent, what do you use when you tell your own kids stories before bed? Do they have a favorite?