I've always understood that they hold Fire Flowers and absorb the Starmen.
Moving on to other power-ups, I'm pretty sure they eat all of the mushroom shaped ones, except for maybe the Ultra Mushroom (New SMB), which I've assumed they absorb (It's taller and wider than they are).
They hold the Fire Flowers, and put on the Suits (Hammer, Frog, Tanooki..)
They absorb the Starmen, Feathers, and Leafs.
That's the way I've always understood it to happen, anyway..