Otoshidama (おとしだま、御年玉) or Toshidama (年玉) is a present which is given to celebrate the New Year. Now it usually means the custom of giving money to children and the money itself. There are some regions where the other items like sweets are given in place of money.
It differs from Seibo which presented at the end of the year, in that elders give it to juniors. Some people say that the name 'Toshidama' is derived from Tamamono (gift) of the year.
Also it is said that 'Toshidama' is derived from Mochidama (rice cake ball) which was given in ancient times.
According to folklore, 'Tama' (same as dama of Toshidama) indicates 'Tamashii' (spirit)and 'Toshidama' is an offering to God for the year. People believe that an offering will be the home of the spirits separated from enshrined spirits and by eating it they can get fresh energy for the new year.
The custom of Toshidama originated in the Medieval Period when samurai presented swords, merchants presented fans and doctors presented pills mainly as Toshidama.
Otoshidama in other countries outside Japan
The custom of giving money to children during the Lunar New Year is seen also in the other countries in Asia. In China it is called 'ya sui qian' (圧歳銭 in Chinese characters, literally means 圧-pressing, 歳-year, 銭-money) which means that by giving money from adults to children in the New Year, children can avoid curses and live peacefully and quietly throughout the year according to folk beliefs, because the pronunciation of '歳' and '祟' (curse) is the same in Chinese.