It is hard to pinpoint the exact origins of prize giving at carnivals. However, it is extremely prevalent today.
They are used to reward players for excellent skill and to create an incentive to play the game. Carnival goers can win meals, stuffed animals, toys, posters and other items. Often times, the prizes are cheap consolation items, such as rubber balls and plastic knick knacks. The harder the game, the more valuable the potential prize will be. Carnivals are famous for awarding massive stuffed animals that are hard to find anywhere else.