Decide on a decent amount (for whether it is a shorter or longer game, whether you want huge bets). Then work out how much you need in total, assign each chip a value - if they are not already there - and deal out however many chips are needed to each player. If you haven't got enough chips, then simply make sure everything is equal and go with what you have.
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Poker chips are your 'money' in a poker game. You use real money to buy poker chips, and then you use the chips to bet and call in the poker game. Once you are done playing, you go to the cashier with the chips that you have and get real cash money in return for them.
I've use it for sizing up my opponents. I am trying to gauge your opponent's reaction. If I look him or her dead-on, my opponent may be able to adjust him or herself and keep from giving away his or her tell. Now, if i am playing with your chips and checking out your opponent out of the corner of my eye (which works even better if you're wearing sunglasses like many of the pros do), he or she may not pick up on it and will give something away. It goes back to the distraction/intimidation factor.