Letters on traditional dreidels represented Yiddish words for gambling gameplay and served as a spinning die. Strongly associated with Hannukah, the letters were also said to form the anagram Hebrew "a Great Miracle Happen There" (referring to miracles of Hanukah in the Land of Israel).
Some Jewish sources claim the dreidel's origin dates to days of persecution when studying Hebrew was outlawed. When governing inspectors would enter schoolhouses, children would quickly begin to spin their tops, hiding their Hebrew studies with the blur of the tops' momentum. Some claim this origin theory was first published only in the late 19th century.
While spinning top games are found throughout the Ancient Middle East, the dreidel likely originated in European Jewish communities, adopted and Hebreacized from an ancient gambling game found in Greek, Roman, British, and finally German cultures. The letters of the traditional dreidel formed the Yiddish words for "nothing, whole, half, and put-in," borrowing the same gameplay language from the cultures above. Judaism has a strong aversion to actual gambling, and in a Jewish context, it is seen as a children's game with wagers played with candies or nuts.
With the advent of Zionism and the relocation of many Jews to the Land of Israel, dreidel-makers from Israel began to replace the Hebrew letter "Shin" with a "Pey," transforming the anagram folk-saying from "a Great Miracle Happened There" to "a Great Miracle Happened Here." Zionism also changed the top's name from "dreidel," a Yiddish word, to a new Hebrew word, "sevivon." Most Israelis today know it by this new name.
Several Jewish mystics, including Rabbi Nachman of Breslov, innovated fascinating teachings that ascribed great spiritual significance to the movement and arrangement of the letters of the dreidel.
Today, the dreidel is widely recognized as a Jewish symbol, but few know the fascinating backstory it.