Singing Parent. Seriously. This may not apply to you if you spend a lot of time face-to-face with your child already, but i think one of the main epidemics of the 21st century is the epidemic of human contact deficiency. Children go from squeaky toy to spell-and-speak to a smartphone while receiving no reinforcement of social cues. Having said that, i think the best musical toy is a toy instrument to play.
Simple music makers. Toddlers enjoy simple toys. Toys don't have to be complex nor expensive, but do have to be child-safe. Musical toys should have pleasing, fun sounds for children. The toys should not be noisy nor annoying to parents. Finally, try to choose toys that do not run on batteries, so that children will not add to the environmental problem of billions of batteries in their landfills.
Almost anything. Toddlers love to explore and musical instruments are wonderful tools. Any instrument that is safe for the toddler and doesn't have excessively loud volume is appropriate. Toddler drums and toddler keyboards are probably the most utilized instruments.