Specially has surprised me this map of Europe during WWII, where switzerland was right ni the middle of germany, and yet still they were untouched, while all east Europe was overrun
I'll copy a post I've made some time ago detailing the situation during the second world war:
It had to do with what it would cost and what would be gained in return.
There would have been a lot of difficulties. If Hitler had started to conquer Switzerland the Swiss army had the plan of going into the Réduit. This was basically giving up a large part of the country and going to hiding in the mountains. Sounds maybe stupid (giving up all your cities) but the strategically most important part of Switzerland are all the passes over and the tunnels going through the mountains (e.g. the Gotthard tunnel) These are very important passages to travel north - south in Europe. By hiding in bunkers throughout the Alps we could have still guarded these passages.
And to add to that there were plans to destroy these tunnels which would have basically made any conquering more or less meaningless.
Also it is rather difficult to fight an enemy in the mountains especially when that is their home territory.
The next point is that the axis powers wouldn't have gained that much from conquering Switzerland as they didn't really depend on having those geographical points.
Also noting the Swiss military was at that time quite large (proportional to the number of citizens) which has to do with our military system (every man has to do military service and is in sort of reserve after that service so if we would mobilize we could effectively more than double our numbers in rather a short time.)
And the last point (which some Swiss people dislike to admit) is that we also held diplomatic relations with all sides of the war. We did hold a lot of the money of all contenders and we also didn't (at least openly) support either side of the war. So no party had a reason to attack us. Last thing was that we also really held ourselves out of the war and just secured our country. Even though some of our cities were bombed we didn't threaten anyone nor did we declare war.
Add to that that we have always been rather a bit isolationist non-interventionist (like not joining any big country groups or alliances and thus didn't have any reason nor obligation to join the war.
I have to say I cannot guarantee that this is all 100% correct. I'm Swiss and this is also a topic that interests me a lot. And I've also discussed this a lot of times before.
I also have some other reasons but for those I'm really not sure if they are just speculation or have valid proof so I'll leave them out.
EDIT: I'm currently on mobile (watching Switzerland vs. Argentina) I'll elaborate a bit more when I'm back on the computer.
No one really "respects" their neutrality. The Swiss have just made sure that any equation that involves invasion is heavily weighted towards "not worth it." People have tried on various occasions, but it hasn't gone particularly well (see the Hapsburg invasion).
As noted in other posts, the cost of taking the nation would be high and the value relatively low (they're landlocked, not particularly resource-rich).
Other important factors not mentioned:
In the modern era, they have taken to wiring their infrastructure with explosives. If someone invades, they blow up their own bridges, greatly increasing the cost of invasion. They've stuck bunkers in every hilltop, redoubt and pass. Twenty-six thousand of them, according to the New York Times (http://www.nytimes.com/2011/01/20/world/europe/20swiss.html?pagewanted=all&_r=0) They have compulsory military service. They're also used to living in the mountains and equipped for it.
Their version of neutrality isn't always "we're staying out of it," but sometimes "we're going to pretend there's no war on at all and just keep doing business with everyone," or maybe "we're going to actually collaborate with some pretty unsavory people."
During WWII Switzerland was useful to the Nazis as a means of--for lack of a better term--laundering all the gold stolen from various sources around Europe (infamously including gold teeth taken from the victims of the concentration camps).
The US actually froze all Swiss gold during the war because so much of it was came from the Nazis.
Here's a PDF that will tell you more than you want to know about the gold, probably: http://www.uek.ch/en/publikationen1997-2000/golde.pdf