Coin rings have been around for a long time, you can also buy them from a number of companies already made. I have read that the first ones were made by military people, when they had free time, mostly using a spoon. Most people now use a small hammer, but I have seen people still make them with spoons.
Want to know how to make them, look here
http://homepage.mac.com/johnhuber/CoinRing/PhotoAlbum20.html
For more info go here
http://www.coinworld.com/news/032408/BW_0324.asp
ARE THEY LEGAL:
Defacing a U.S. coin is only criminal if someone is attempting to defraud, according to the United States Code, Title 18, Part I, Chapter 17.331. So, rest assured that the federal authorities will not hunt you down if you decide to make a ring out of a coin, as long as you are not attempting to defraud anyone.
An other interesting and amazing thing are shrunk coins. Ever heard about them?
Just look at these
You can buy these sort of shrunk coins, for more info see
http://capturedlightning.com/frames/shrinkergallery.html
Its quite interesting, tells how they are made and such... Have fun looking. I am even thinking about buying one...