A couple of nice quotes on the subject.
You do not baptize children because, as you say, they do not believe. Why, then, do you preach the Word to old folks who do not believe who may, in the course of time, probably come to believe? You certianly do this only because God has commanded it. For if you baptize me because I am able to say the words "I believe," then you baptize me on the basis of me myself and in my own name and on no other basis. Since, then, it is unkown to you whether the person being baptized is believing or unbelieving, the baptizing is done solely because of God's command and behest.
-Martin Luther
Let us look at the reason why they hold that children do not believe. They say: Since they have as yet not come to use their reason, they cannot hear God's Word; but where God's Word cannot be heard, there can be no faith; Rom 10:17: "Faith cometh by hearing and hearing by the word of God," ect. Tell me, is one who judges God's works in this way, according to our ideas, speaking like a Christian? Children have not come to the use of their reason, you say, therefore they cannot believe? What if you have fallen from faith through this reason and children have come to faith through their unreason? My friend, what good does reason do when faith and God's Word are concerned? Is it not a fact that reason most violently resists faith and the Word of God so that because of it, no one can come to faith and accept God's grace, as Christ says Matt. 18:3: "Except ye be converted and become as little children, ye shall not enter into the kingdom of heaven." How often Christ points out to us that we must become children and fools and how often He condemns reason!
Again, tell me, what sort of reason did the little children have whom Christ caressed and blessed and assigned to heaven? Surely they, too, were as yet without reason. Why, then, does He order that they be brought to Him, and why does He bless them? Where did they get the faith that made them children of the kingdom of heaven? The fact is that just because they are unreasoning and foolish, they are better fitted to come to faith than the old and reasoning people whose way is always blocked by reason, which does not want to force its big head through the narrow door....
But since their reason so besets men, we must attack them with their own wisdom. Tell me, why do you baptize a man after he has come to the use of his reason? You reply: Hears the Word of God and believes. I ask: How do you know? You say: He confesses as much with his mouth. Should I say: What if he is lying and deceiving? After all, you cannot see his heart. Well then, if in this instance you baptize only because a man has outwardly professed faith but are uncertian of his faith and must wonder whether he has more within his heart than you observe, then neither his hearing nor confessing nor faith is of any avail; for it may be mere delusion and not a real faith. Who, then, are you to say that outward hearing and confessing are necessary for Baptism, that where these are not present we should not baptize, and that where they are present we should?... Is it not true that you must admit: You have no right to do or to know more than the person to be baptized be brought before you and that you are asked to administer Baptism; and you should believe, or rather, simply commit to God whether or not he really believes in his heart. Thereby you are excused, and you baptize correctly....
Besides, tell me, where is the reason of the Christian believer while he is asleep, since his faith and God's grace admittedly never leave him? If, then, faith can continue without reason, why should it not also begin in children before reason is aware of is?...
Commit the faith to Him who commands them to be brought and baptize them at His command, saying: Lord, Thou dost bring them here and dost command them to be baptized. Therefore Thou wilt surely answer for them to be baptized. Therefore Thou wilt surely answer for them; on this I depend. I dare not drive them away or forbid them Baptism
....
-Martin Luther