That's a great question!
What I normally do when I am reading to the littler ones, is let the older ones choose what they would like to do. Either sit and listen, or play a quiet activity away from us, so as to not be a distraction. Most of the time they choose to listen, children love repetition, and sharing what they know.
When I am reading to the older children I hand some age appropriate books to the younger ones and let them flip through them on their own. A 3 yr old, you can then ask to tell you the story of what they saw in the book. Under the age of 3, just feel lucky if they didn't try to eat the book!
I hope this helps,
Billie