According to Morocco, the practice of wearing a jewel in the navel was totally invented by Hollywood. It has absolutely no basis in Middle Eastern tradition. If you watch an “Oriental dancer in Egypt, Turkey, Greece, or anywhere else “over there”, you will never see a dancer with a jewel in her navel unless she got the idea from a foreigner. The concept was inspired by the Hayes Code, which was a censorship guideline in the entertainment industry that arose after the Fatty Arbuckle scandal. The Code forbade showing the navel in a movie or television show, because it supposedly reminded viewers of a crevice a bit lower down, thereby creating lustful thoughts & mortal sin. So, during the fad of “sheik” and “harem” movies, the way of getting around this restriction was to put jewels in the navels of the fine young ladies who were lounging around in costumes representing Hollywood’s fantasy world.”

http://www.cnn.com/2007/LIVING/wayoflife/07/31/censorship/