Large nonmetallic container (thin and wide, preferably) for water
Explain how the earth's magnetic field works and remind the students how magnetic fields look in general. It would probably be better to perform this experiment after a section on magnetism. Remember, the earth acts as if a giant bar magnet has been stuck through the middle of it since the center is primarily composed of (hypothetically, at least) iron and nickel. If you have a poster, show the students how the magnetic field of the earth looks. If you don't have a poster, you can find nice images online. Move on to the subject of compasses and some of the different types of compasses that exist. You might want to mention declination and true north.
The way things used to be...
Prior to the year 1600, free-floating magnets and the constellations were the way explorers kept their bearings. Separate the students into small groups. Explain that each group will create their own free-floating compass using the materials listed above. Realize that in order for the compass to work, you may have to go outside the classroom.
Step 1: Fill each of the containers 3/4 full of water.
Step 2: Add a few drops of dish soap to the water. This will help prevent the styrofoam from moving to the sides of the dish by reducing surface tension.
Step 3: Run the magnet across the needle in the same direction approximately 50 times.
Step 4: Set the needle on the styrofoam and place it gently into the water.
As long as the needle and styrofoam stay away from the sides of the container, it should slowly move to point north and south. Using a map or another compass, let the students decide which end is north and which is south.
Shawn Len, 2000.