I've had the opportunity to see a multitude of fireworks, and I've seen some good shows, but just seeing them explode over the Washington Monument brings a whole new component to the 4th of July.
Take a blanket and a picnic to the Mall on the 4th of July and just relax and enjoy the day. Throughout the day there are activities for the whole family, not to mention the food vendors. During the evening, the National Symphony plays just about every Sousa march and 4th of July music you could think of, and then, around 9:30 or 10 p.m. the fireworks display begins. No matter 2-year-old or 80-year-old, everyone oohs and aahhs at the lit sky.
Hint: When you leave the Mall after the fireworks, take about 15 minutes to walk to a Metro station not on the Mall. You'll get on the Metro lots quicker, and you'll get a seat.