What causes wheel hop?
A lot of people don't know why wheel hop occurs, which often leads to them throwing the incorrect parts at the car in an effort to eliminate the issue. Fortunately understanding (and correcting) wheel hop is not difficult. Here is what happens. When a car accelerates, you can picture the forces involved as something (the ground) pushing the driven wheels of the car forward. Obviously if you push the wheels forward, the car is going to move forward also. However, the wheels are not rigidly fixed to the chassis, so when the ground pushes on the wheels, they move forward a bit in the wheel well. Normally a car's acceleration is so small that this motion is negligible, but when a car accelerates quickly, especially during a launch, the wheels can move forward quite a bit in the wheel wells. As the wheels move forward, significant toe changes occur. Now, everybody knows that a tire can provide the most grip when it is perpendicular to the ground, parallel with the acceleration, and pressurized to provide the optimal contact patch. That being said, if the toe of the driven wheels changes during acceleration, the grip of the tire must be changing. Wheel hop is a result of this change in grip. Here is the sequence of events:

1.) Acceleration begins with good grip.
2.) The wheels move forward, toe changes, and available grip is reduced. Wheelspin occurs.
3.) During wheelspin, acceleration is very small. The wheels move back again, toe changes back, and the tire regains grip.
4.) Acceleration begins again, and the process repeats itself.

This rapid switching between grippy acceleration and wheelspin is wheel hop. My above description of the wheel hop process sounds tame, but the frequency of the grip changes and the magnitude of the forces involved is what makes wheel hop so violent. Race tires can prevent wheel hop since they have more grip (i.e., they don't lose grip even with the toe change), but cars that wheel hop with race tires will do so in a much more violent fashion.

How do I get rid of wheel hop?
Getting rid of wheel hop really isn't difficult. If you can limit the motion of the wheel with respect to the chassis, then the toe changes during acceleration will be small and the tire will not suddenly lose grip. If the tire does lose grip (common on a high-HP car of course), then it won't suddenly regain grip due to the wheel moving back to it's static position. How do you keep the wheel from moving with respect to the chassis? Well, assuming your car has reasonably rigid suspension arms, then all you need to look at are the suspension bushings! The wheel can move with respect to the chassis because the bushings flex...especially old, stock rubber bushings. Sometimes simply replacing old rubber bushings with new rubber bushings is all that is required. However, on a modified car that posesses more horsepower than the designer's intended, upgrading to stiffer materials like nylon or polyurethane may be required. The ultimate solution is to use rod ends or spherical bearings at every suspension joint, but that is unreasonable unless your car will never again see public roadways. Anyway, by simply upgrading your bushings, the suspension bushings will not flex as much under strong acceleration, the wheel will not move far forward in the wheel well, the toe of the car will not appreciably change, and your tires will not lose grip. Wheel hop will have been eliminated.

In some cases weak shocks can allow a perturbed wheel to continue hopping up and down since the motion is not damped. This is a less likely scenario, but shocks should not be ruled out as a potential culprit.

What doesn't get rid of wheel hop?
As mentioned earlier, a lot of people throw the wrong parts at the car in an effort to eliminate wheel hop. First, springs and sway bars will generally not do anything to promote or prevent wheel hop. Additionally, suspension settings, such as camber and toe, will generally not help the issue. It is the change in toe that leads to wheel hop, not the static setting. Tires do not cause wheel hop, though they do determine the grip level at which wheel hop occurs. For example, race tires, with their increased grip over street tires, will not break traction until you reach a higher level of acceleration. Some people might think that race tires solved their wheel hop problems, but in truth they merely changed their "wheel hop acceleration threshold" from a level below their launch acceleration to a level above their launch acceleration. Once they increase their horsepower to the point where they can accelerate enough to once again reach that threshold, their wheel hop will return.

Limited-slip differentials will also not prevent wheel hop. They may increase the acceleration threshold at which wheel hop occurs (much like installing race tires), but once again an increase in horsepower will eventually reintroduce the problem.

Check your shocks. If they are not malfunctioning, then you need to increase your bushing stiffness.