JOEL - Your'e right. It is unusual for someone outside our religion. However, the practice actually began several hundred years ago. For example, as early as 610AD at a monastery somewhere in Southern France or Northern Italy, monks used scraps of dough and twisted them to represent a child's arms folded in prayer. The pretzel was born. The three empty holes represented the Christian Trinity. The monks then baked the twisted dough strips and awarded them to children who learn their prayers well.
Nowadays it's mostly a traditional thing that was started a long time ago in our church to help keep small children from disturbing each other while a prayer is being said. If their arms are folded up like that there is less chance of them poking their neighbor. We tell them it is a way for children to show respect to God during a prayer. Most adults in our church don't fold their arms like that while saying a prayer. The parents you saw doing it were probably trying to set an example for their kids to follow. But not every kid in our church does this. In some countries, a person folding their arms is a sign of disrespect. So a lot of it depends on the culture of the country you are in.