The History
The origin of SWAPS is Native American. Potlatch is the ceremonial exchange of gifts practiced by Native Americans of Northwest Coastal tribes. The custom stems from the legend explaining why birds have colored feathers. As the story goes, two Indian girls plucked feathers of a magic bird and distributed the multi-colored plumage to the colorless birds living in the forest. From that time on, birds have had brightly colored feathers and those gifts were remembered at Potlatch ceremonies. Families were summoned to the Potlatch by a messenger carrying a bundle of sticks representing the number of people to be invited. The ceremony included speeches, songs, dances, games, races and refreshments. The host and members of his family were costumed and enacted legends about their heritage. The gift giving came last of all, just before the guests departed. Since Potlatch gifts were symbols of the families status in the village, they were often quite elaborate, often being carved boxes, canoes, dishes, jewelry, mats and baskets. The Potlatch ceremony was given to commemorate the births, deaths, marriages, or coming of age of members of the group.

The idea of SWAPS was started at the original National Roundup Conferences. At that time a SWAP was a little remembrance that one Scout gave another. SWAPS are handmade, thus the girl is giving a part of herself to show friendship. Swaps are exchanged at National Conventions, Council events, Wider Ops, SU or neighborhood events, troop meetings and most frequently at day camp. They can have a tag attached with the event name and date or the Troop number, Council name or State.  In some countries SWAPS are called hat crafts.

Swapping promotes friendship and encourages girls to talk to other people. SWAPS are great mementos of a good time as well as a great way to share something about where we live and what we do.
SWAPS
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SWAPS which stand for “Special Whatchamacallits Affectionately Pinned Somewhere” or "Share With A Pal" are little trinkets that are made to exchange with others.  Trinkets are made out of various low cost or no cost supplies that can be usually found around the house and can be made into pins, stickers or even bracelets. 
If a girl wants to receive 10 swaps, she needs to make 10 swaps. Think about the size of the event that you will attend when you decide how many swaps to make. Don't make more of one type of swap than the number of people attending the event! If you're attending a small event, you will want to make several types of swaps. A reasonable number is 10 or 15 swaps per girl. Some girls will want to make more than this!
SWAPping Etiquette
SWAPping "do’s and don’ts" vary from council to council but there are some basic rules that everyone should be aware of. SWAPS for trade are carried separately from the ones you want to keep. Keepers are frequently pinned on to hats or bandannas. Sometimes they are pinned onto a specific area of a shirt. SWAPS for trade can be in a SWAP bag, zipper baggie, shoe box, a friendship tie or pinned onto ribbon, any thing that can be easily carried. SWAPS are usually 1" to 2".

It is considered rude to refuse to swap with someone who asks. If you don’t like the item you have been given or already have an identical SWAP, accept it politely and give them one of yours with a Girl Scout smile. (Try to make your SWAPS something you would want to receive.) ALWAYS say thank you!

Try to have a few extra SWAPS on hand for those people who don’t have any to give in return. Most SWAPS have a pin on them so they can be pinned to a hat or a shirt but they don’t have to. SWAPS can be bracelets, necklaces, council patches, event patches, district/division/camp crests, or other small items. SWAPS can also be displayed on a banner, troop flag, or the kitchen curtain.

SWAPS should NOT contain edible food. Food items can attract bugs and critters when outdoors.
SWAPS Links
About.com
Dragonswaps
Girl Scout Central
Girl Scouting
Girl Scouts of the Mississippi Valley
Girls Rule
Making Friends
Pinky's Page
Scouting Web
Swamped with SWAPS
Troop #239
Trudy's