It is a compulsive habit. I don't know where it comes from... but it isn't something she is choosing to do. Trust me. I used to do it as a child. After several YEARS of struggle, I managed to stop.. but as an alternative I began picking/chewing on my cuticles and skin around the sides of my nails. I still do it. And I can't help it.
My daughter also started chewing her nails. I think it starts off with maybe a broken nail or split or knick in the edge of one, so the child nibbles it down to try to smooth it out. Well, as you can figure.. that doesn't work so well... but it becomes a habit VERY quickly.
To help my daughter stop (and she doesn't chew her nails any longer.. though she HAS started on her cuticles, just like I did), I let her chew gum so she was keep her fingers out of her mouth. Being busy with her hands is the biggest help you can give her. Sitting watching TV is the WORST for nail biting!
If you can put a band-aid on her nails (or at least the worst ones) that can help her leave them alone. Or maybe buy her some "fancy" gloves to wear (like Easter gloves?). Give her small toys to manipulate (think legos and things that take two hands) or a handheld video game (Leapster? or a DS) that requires her to hold with one hand and use the stylus with the other. Also, give her manicures. Put lotion on her hands often.. as that is when I notice I pick at my nails and cuticles the most.. when they are dry and have rough poke-y areas. You can try painting her nails, too. Sometimes it helps b/c it changes the texture of what they are chewing. Just be careful of the "kiddie" polishes, because I have noticed that they are very goopy and peel off after a bath on almost the first day. Just not very good quality.
Every time you see her with her finger in her mouth... say... "fingers out of the mouth".. but don't get upset or angry with her. Just be matter of fact. She is NOT doing this to get on your nerves or for attention or anything like that. It is just a compulsive thing. I don't know why. Maybe some psychologist out there can explain it to us.... My husband doesn't "chew".. never has. My son only does it if he rips one.. it never became a habit.
So I don't know why I did, or why it became an issue for my daughter.