While you will see many different types of coins challenge coins are very special coins that are given to service personnel as a way of building their moral and enforcing the image of the entire unit being behind each other, and supporting the various people in the unit.
The tradition of challenge coins began during the First World War. During this time many volunteers joined the United States Army Air Service which was the forerunner to the US Air Force. One of the service lieutenants ordered small, solid bronze medallions or coins to be made. These coins were then presented to the members of his squadron. As one of his squadron mates had never owned anything as valuable as this coin he placed the coin in a leather pouch which he hung around his neck.
When this serviceman was captured by the Germans all of his personal belongings were confiscated. The only item to escape their detection was the challenge coin which was still hanging around his neck. When the army air force man escaped from the Germans he was later captured by the French who mistook him for a German as he was wearing one of their uniforms. Just before this service man was about to be executed he showed the challenge coin to a French officer in the hope that his country of origin would be proven.
When he returned back home and recounted his tale the coin was called a challenge coin and more of these challenge coins were minted. These challenge coins were later adopted by all branches of the military. From the legend of this coin a new way of using the coin was adopted. This is where the challenge coins tradition was born.
In this tradition the challenge coins are used to boost moral and lets the various personal see if their unit mates are wearing their challenge coins. When one service personnel member meets another and demands the challenge coin to be produced, the challenged person has to produce the coin.
The failure to produce the challenge coin means that a round of drinks has to be bought for everyone who is present at the challenge. On the other hand if there is a group of people who have been challenged and they produce their challenge coins the challenger has to buy everyone a round of drinks. As you see, from the beginnings of the challenge coins to the present day, these coins represent the steadfast tradition of military honor and loyalty.