Basically, it's a penpal/scrapbook/share your stash/pretty to collect way of interacting with friends. The concept was created by Janette Lane and you can read all about how she came up with these awesome little goodies on her blog, you can also join the Pocket Pal Network to find partners to swap with.
First, you start off with a baseball sleeve which has 9 pockets that are 3.5H x 2.5W each. Then you start filling them with goodies. I like to add lots of fun treasures to my pocket letters, but some people just keep them flat. There's no right or wrong way, whatever you and your partner decide.
Normally, you have a theme of some sort. Most of the ones I've been involved with to this point have the theme "heid swapp" as they have all been a group of girls I've met through Heidi Swapp in one way or the other
It's really fun to collect these little treasures and put them into a 3 ring binder. If there are multiples of goodies in them, I sometimes take them out and use on my next pocket letter, but sometimes I just leave it all as is just because it's so darned pretty.
When you get a group of partners you can either send a pocket letter to each individual, or you can do it in a chain fashion, i.e. person 1 sends to person 2, person 2 sends to person 3, and so on.
This (above) is another one I've sent to my friend, Laura. You can either do a one time swap, or multiple times. It really is up to you. You can see, I love to fill mine with fun little die cuts my friends can use on scrapbook layouts, project life or cards.
When you're all finished, you fold it in 3rds lengthwise and it fits nicely into a #10 standard envelope. How cool is that?
Here are some pocket letters I have received from friends: