Everyone has been given something that is just-not-what-you-had-in-mind. You can donate it to a worthy cause, or post it on www.freecycle.com where everything donated is free to users. You may bury the horrible gift in a box where you may never run into it again. Whatever you do don't dispose of the item.
We all know about re-gifting, a risky and often unpleasant practice. Re-gifting is not usually a welcomed practice. Most importantly if the individual that gave you the gift finds out. There are a number of ways to make use of your gift, without the uncomfortable and deliberate re-wrapping and passing along.
1. Create a "Treasure Box." I use a large tote. It is wise to label the gift with where and when you got it.
A. Items that you cannot use, or you have duplicates of, all get put together in the same box.
B. Over time, group similar items together i.e. games, movies, an outfit, etc.
C. Try to give multiples of a like item. Take DVDs for an example. Take the movies, wrap them individually, and put them in a large popcorn bowl. Include candies, chocolate, or whatever else you want to make the gift go further. If you are giving the DVDs to an adult or family, try upping the gift with a nice bottle of wine. The goal is to avoid spending too much, but make a nice gift. Make sure that you are not giving the gift back to the individual that gave it to you.
With a bit of experience and personalization regifting can be acceptable and fun (as long as you don't get caught!)