The term "Mumblety-peg" came from the practice of putting a peg of about 2 or 3 inches into the ground. The loser of the game had to take it out with his teeth. Mumbletypeg was very popular as a schoolyard game in the nineteenth and first half of the twentieth centuries, but with increased concern over child safety the game has declined in popularity...Photo reproduction of 1922 magazine page via Centuries of Advice & Advertisement.
Mumblety peg is generally played between two people with the aid of a pocket knife. In one version of the game, two opponents stand opposite one another with their feet shoulder-width apart. The first player then takes the knife and throws it to "stick" in the ground as near his own foot as possible. The second player then repeats the process. Whichever player "sticks" the knife closest to his own foot wins the game.
If a player "sticks" the knife in his own foot, he wins the game by default...
Addendum: Rules here, courtesy of Doc Rock.