A challenge coin is a small coin or medallion, bearing an organization’s insignia or emblem and carried by the organization’s members. Traditionally, they are given to prove membership when challenged and to enhance morale. In addition, they are also collected by service members. In practice, challenge coins are normally presented by unit commanders in recognition of special achievement by a member of the unit. They are also exchanged in recognition of visits to an organization.
A good write up of the history of the challenge coin is here.
A good write up of the history of the challenge coin is here.