Please try to make your answer as language agnostic as possible - I'm not interested in "I would have the candidate build a website using ROR and MySql" - but more things like "I would want to see how would the candidate try to solve a bug"
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I give importance to 3 things in coding:
I also prefer giving them code editor instead of IDE, cause in my city in India, A lot of .NET freshers have nice OOP concept, and great college projects, but when it comes on coding, turns out they were taught Drag-n-drop in VS, changing stuff from properties, instead of changing using code. Even Java candidates can't draw layout because they were taught on netbeans instead of coding UI. Coaching classes tells them this is how big companies does and they don't need to learn coding manually.
Actual program to write, depends on candidate, based on what is on its CV, and how much experience he is.
For a college fresher in CS/IT background, I can ask for simple sort application which reads from file, and print output on a file. For a few years experiance, Code a calculator's backend with 2 interface and 5 classes in suitable generalised architecture.
A designer can have a Paper-Pen first and then write CSS / work on photoshop like tool (I usually give them Pixlr).
Front-end developer must be able to perform ajax and dom manipulation without jquery (Still taught here in my city)
DB programmer can design a db-diagram for a topic and then explain why he chose that diagram, and importantly discuss cons of his db-diagram. If he is experienced, I make him write a pl/sql equivalent function for something on that db.
Similarly, HR candidate is asked to make a presentation on a particular topic, on libreoffice impress. Accounts candidate are given dummy excel data sheets, and asked to generate a pie chart overview on expenses from it.
I also increase complication on things based on how much candidate brags on their resume. There was one candidate from IIT asking almost 5 times what we had on budget, bragging about how he hacked his school servers and how he has 20 android apps which google deleted because they violated their terms, And how we would be benefited by hiring him. I asked him to hack my unsecured personal blog, or code an android button showing toast when clicked, but without Android Studio.
Knowing how much the person knows about Data Structures. That's what I would look for when creating the coding challenges for the interview. It's maybe related to some specific jobs, like Senior job positions, or when recruiting young CS students/recent graduates.