My 7 year old had a blast doing it last year. My 4 year old wasn't interested.
You start with a lanyard with a few pins on it, and then you can trade with cast members to get better pins. There are guest to guest transactions, but I only let my daughter trade with CMs.
Last year I bought a huge lot of pins off ebay, and then each morning, my DD would pick about 10 to put on her lanyard to trade. Once we were in the parks, each cast member we saw, she would ask to view their lanyards and trade with them. My DD is very shy, so we didn't mind her stopping and conversing with the CM because we saw it as an exercise for her to grow her communication skills.
Of course, by the time we left, I think she had about 25 different Tinkerbell pins. Pin Trading can get expensive if you are buying the pins in the parks, but if you plan in advance, and get pins off of ebay, it can be very fun.