In the poker room, the house does not play against the players. Instead, it takes a percentage of the pot, up to a set maximum amount. That is called the rake. When the dealer takes the rake, the dealer drops the chips into a locked box with a slot on the top to allow chips to be put in, but it is difficult for them to be taken out without unlocking the box. This is referred to as the drop. A drop chip is a chip of a value more than $1, typically $4. It is used to replace the $1 chips taken from the pot for the rake so that the drop box does not fill too fast. In some casinos they have chips that are only used for the drop and no other purpose. Those are drop chips. In many casinos, they use chips that are also used for other purposes.

Today most low limit players play "no limit" games where you can bet any amount up to the amount of chips you have on the table. There are also limit games, where the amount you can bet is set at a specific amount for each round (you can choose whether to bet or raise, but not how much). These games have gone out of favor and are typically spread only at higher limits. There were also "spread limit" games where you could choose between a tight range of bets (for example "$1-5" games), but they seem to have disappeared entirely. Back in the days when poker rooms had a bunch of lower limit "limit games", they used $2, $3 and $4 chips on certain limit games, and many of those chips are simply rack chips and not true drop chips. Chip collectors in the 2000's started calling all chips of these values "drop chips" when most of them were just rack chips and not actual drop chips.

If any of this is not clear, let me know and I will try to explain whatever you don't understand.

Michael Siskin