I didn't really know anything about it, other than that it's mentioned in the bible story, but it involves binding the baby tightly in a blanket in order to sooth it and help it sleep more soundly by eliminating it's startle reflex. It's also said to reduce SIDS and colic. It was formerly believed that it was necessary in order to ensure that the limbs grew straight.
Throughout the 17th and 18th centuries, philosophers and doctors realised that it was not necessary for straight limbs and was in fact overly restrictive for muscle development. Jean Jacques Rousseau (who I suspect didn't much like women) said that women despised their duty to nurse their own children and entrusted them to mercenary wetnurses who would have to pay less attention to a swaddled baby than one who could move freely.
Modern swaddling seems to be less restrictive and its advocates say that it simulates the closeness of the womb and calms the baby. It is believed to reduce SIDS because it keeps the baby in a supine position which reduces the risk of SIDS. But if the baby does end up on it's front, there is no way to roll over again as the arms are bound within the blanket. Recent studies actually suggest that it could contribute to SIDS. Of babies who died of SIDS, 24% were swaddled, while only 6% of the control group were.
So that's a brief version of what I learned from Wikipedia. Then I went to see what the rest of the internet said. Most of what comes up does say to be careful to leave room for the hips and legs, because of the risk of dysplasia. A lot of sites also recommend to stop swaddling at about one month old, presumably because the baby will want to start moving around at that time. That all sounds okay.
But I did find some video tutorials that said nothing about dysplasia, and a suspicious number of deleted comments. My guess is someone criticised the technique and it proved easier to delete the comments than to engage them. There was also a comment saying that more SIDS victims were unswaddled than swaddled. But that is simply a corruption of the actual statistics seen above as the control group had far more unswaddled babies who didn't suffer from SIDS.
Also, try doing an image search on google for swaddling. It does not look comfortable.
I'm inclined to think that the ideal way to mimic the womb to sooth the baby is to hold it closely. Hugging soothes the huggee and the skin on skin contact is a major part of the mother and child forming a bond. Binding it up just seems to be the lazy solution so you can go do something else. And I wonder if it is inadvisable to swaddle in order that the child will wake less. It seems like a good way of making sure everybody knows baby is still alive. Plus it's how they realise they need a feeding, a change, or maybe even can help prevent SIDS.
So anyway, back to where I started with hip dysplasia. Although some conscientious advocates of swaddling stress to be careful of the hips, not all sources do. And I have no idea what goes on at childcare classes or what hippy alternative women think is better than what the doctors say. I don't doubt that lots of people are shown a safe way to do it and mess it up.
It's really best to drop the practice altogether - when we weigh up the benefits, they turn out to be erroneous, or achievable in another way. It doesn't make for straight limbs, it doesn't prevent SIDS and if it does mimic the womb, a hug is better.
Again, I know it was an unusual topic for a post here, but it piqued my interest and I thought the re-emergence of a traditional method despite despite warnings of its danger might interest a few of you too. Especially when you throw in the misinterpretation of statistics. :)