Being a Brit, we often say things which take some explaining if your from the US, so I thought I would blog their definitions. However, it's hard to include the subtle notes of sarcasm I tend to use with this phrase :-)

George Edward Lynch Cotton, English clergyman and educator, assistant master at Rugby 1837-1852, the young master in Thomas Hughes's "Tom Brown's School Days". Bishop of Calcutta, 1858 where he did missionary work and established schools for Eurasian children. In requests to England he asked for donations of clothing, often emphasizing "warm socks" for the children. In fact he seems to have held the simplistic view that if the children had warm socks many of their problems, mal-nutrition, disease, racial prejudice etc. could be easily solved. Little old maiden ladies all over England spent their time knitting socks for Bishop Cotton and sending them off to India. He blessed all items used in his schools, and many shipments would arrive labeled " Socks for Cotton's blessing" and reportedly even "Cotton's socks for blessing". Cotton's socks easily became corrupted to cotton socks,

The phrase is now a term of endearment for a child who has done something sweet. It is also a way of saying thank-you. Due to its association with "sweet" children and bolstered by Cotton's simplistic views it is often used ironically, thanking someone in a position of authority for suggesting a benevolent, yet simplistic even childish view or solution for a difficult situation. Sometimes just a humorous thank you like " I'll dance at your wedding with bells on."