First to just clarify, Switzerland has participated in some large conflicts during the last 600 years, most recently the Napoleonic wars, though they have been neutral since. I will mostly touch on the world wars but most of the points apply to almost any period since 1880.

Switzerland as a country is located high within the alps, which is a very difficult to navigate area. The mountains are treacherous, and has many small narrow passages that would remove any numerical advantage an enemy would have. Add to this that these passages were heavily fortified with bunkers and defence positions.

On top of the previous point, Switzerland has a very large military force relative to it's population. With mandatory military service a large part of the population are training in combat and the government would have been able to mobilize a large part of it's population. At the height of mobilization the Swiss army had over 850,000 soldiers mobilized. These soldiers would have had the homefield advantage, knowing the terrain and being used to the conditions of the mountains.

The main idea was to make it as costly as possible for any other country to try and invade. The main benefit that holding Switzerland could provide was an easy passage from central Europe to southern Europe, and the swiss knew this. The main strategy if war had broken out were to retreat to the bunkers along the mountain passes and defend from there, if the army would have lost they would have blown up the tunnels effectively making the country impassable, rendering any advantage victory would have given useless. This strategy was called the réduit.

The swiss were also neutral, and were no threat to other countries surrounding them. There was no need for anybody to be afraid that Switzerland was suddenly going to invade, so the germans, italians, french and austrians were happy enough to let Switzerland act as a natural bufferzone between their empires.