How does a swap and drop work?
Put simply, two characters meet somewhere in-game and proceed with a trade of items, currency, etc. However, once the trade is made, but before the game goes into a save-state, one of the players (the person 'giving' the items) drops or disconnects from the game and/or game server. In this example, since the game did not save before the character dropped both characters will now have a copy of whatever it is that was duplicated.
Take note: in most games that are connected online to the developer (perhaps via Xbox Live or the PlayStation Network), especially if they are a massively multiplayer online role-playing game. You might think it would be simple to duplicate an item in a game like World of Warcraft, for example, but the development teams working on titles like these have placed precautions to avoid such alterations to the gameplay mechanics. Item inventory is often stored on the server and retrieved from the server, not on a local hard drive or other memory device such as a memory card.
This makes utilizing the swap and drop method irrelevant as the server always knows the location of each item and can assign it a truly unique identification string. Any duplicates and they will be filtered out, or worse, your account will be flagged and possibly banned for good without warning. This is generally discussed and agreed upon whenever you install a game on a PC or Mac or begin gameplay on your console, whether its an Xbox 360, PlayStation 3, or Nintendo Wii (in some cases).
In addition, many developers have gone several steps beyond saving to a server under their control to keep fluctuations on their game's economic volatility at a rate where it keeps gamers hooked just long enough to captivate them with the game's more subtle nuances, almost ensuring a return visit from the gamer. Yes, they're addictive, I mean think about it, you're reading this right now, perhaps looking for a way to skirt the system. Why? Not to throw pie in the face of the developer, but to make your gameplay a bit easier and 'stress-free,' so to speak.

