"We were up in the bedroom," Harris, 24, tells PEOPLE, "and my favorite movie is The Little Mermaid, so he had the ring in a Little Mermaid box, and that was so special. I opened it and the first thing he said to me was, 'I hope it fits!' "
Adds Hefner, 84, "I got her a little music box with the Mermaid theme to it, and it just looked like the perfect size and the perfect place to be the ring box. So when she started unwrapping that gift, I reached over and wound it so it was playing music while she discovered what was inside."
Although she cried with happiness, Harris says, "There wasn't any 'down-on-one-knee' or anything like that, because we are not traditional."
The ring is a circle diamond "a little over three karats," says Harris, "and it's on platinum setting and it has diamonds all around the band as well. It's so pretty."
Christmas PresentsMeanwhile, in addition to holiday gifts of an iPhone and a scrapbook of their past year together, Harris gave Hefner a painting she commissioned of her, Hefner and their dog Charlie by former Playmate and Amazing Race contestant Victoria Fuller.
Crystal "is so totally devoted," Hefner says. "Her priorities are pretty much our relationship, No. 1 and No. 2 and 3, and you don't always find that. Despite the age disparity, the truth of the matter is we have a great deal in common, we really complement one another, we have a wonderful time together, and I love her."
The pair met at a Halloween party at the Playboy Mansion in 2008. "We were both psychology majors in school, so there was never a dull moment," says Harris. "We always had something to talk about. We go to Vegas and stay at his suite at the Palms, we travel all over, and we've been to Europe. We have movie nights at home with all our friends, and I have a blast with him. He's the one with all the energy!"
Hefner, who's been married (and divorced) twice, admits he has been publicly skeptical about the institution of marriage. "I do think there is a certain reality to the fact that people start to take one another for granted," the Playboy founder says.
"I just simply found myself in a relationship with Crystal in which I felt, quite frankly, the opposite seemed to be true – that the more committed to one another we were, the closer we got, and the more we loved one another, and I just think this one, for me, will be the exception to the rule."
Kendra CongratulatesJoining Harris and Hefner in celebrating their engagement are the stars from the E! series Girls Next Door. Kendra Wilkinson Tweeted her congratulations to the couple. Bridget Marquart "sent us 'I Do' cupcakes from Sprinkles," Harris says. "And then Holly [Madison] is coming here on Wednesday to do film a segment for her Holly's World show, so it's going to be cool to have her here to say hi."
Although both are enjoying their engagement and not yet in wedding planning mode, Harris and Hefner agree they are not in family planning mode, either.
"I have never been the children type," says Harris. "I told my mom I never wanted children. I wanted animals instead, and there are tons of them here."
Adds Hefner, "If it happens, it happens, but that is not part of the plan."