It dates back many years to when a man found that his woman's crotch smelled terrible. He asked her to keep a car air-freshener in her crotch to cover the smell, but it would always slide and fall out of place.
Thus, he came up with the idea to have it "hang" in place. And so the woman got a loop style ring pierced just below her belly-button. They place the string of the air-freshener through the ring, and vióla! Her crotch no longer smelled!
That is how the belly-button piercing came to be.