We do a little bit of both...I use my judgment and sometimes purge items not frequently played with, and they rarely notice. They do often come up with a good # to purge when we work together, and they are definitely more eager if I spin it as 1) this will help make it easier to clean up the playroom or the child's bedroom (they seem to get that too many toys=overwhelming cleanup job) and 2) it is good to make room for new things before they start rolling into the house.
Sometimes they want to purge something I am not ready to get rid of (like DS1 is happy to do that, when I might want the item for DS2!). We also rotate some toys out of play, which helps.
We do a big purge in the fall every year and then smaller ones more frequently.
Mama to DS-2004
DD-2006
and a new addition-ds born march 2010