Poppys were first associated with Veteran's Day by a poem by John McRae, In Flanders Fields, which describes the poppys that grow on a battlefield of Flanders, one of the worst of World War I. The red color being appropriate for the bloodshed of trench warfare.
Source(s):
http://en.wikipedia.org/wiki/Remembrance_Day

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Red poppies are worn as a symbol of gratitude to the men and women who have sacrificed all or a part of their life in defense of our freedom.

Below is an excerpt from a recent article written by Commander Rick Lathrop, VFW Post 404:

"The poppy was adopted as the official flower of the Veterans of Foreign Wars and in 1923 a plan to pay disabled and needy American veterans to make the poppies was adopted. The name grew out of the disabled poppy makers in remembrances of their buddies who never came back from the war. The little red flower has forever become known as the "Buddy Poppy,"

Each year Veterans of Foreign Wars volunteers distribute millions of poppies in exchange for contributions to assist disabled and hospitalized veterans. The hospitalized veterans who make the poppies earn a small amount, which helps to supplement their incomes and makes them feel more self-sufficient.

VFW Posts and Auxiliary units must purchase the poppies they distribute. All donations from the poppy drives are used solely for assistance to veterans and their families."
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