Also, if you get ten medals in "The Four Swords," there'll be a third lumberjack in the lumberjack house that'll give you a new ability if you find ten items for him. He'll give you clues on what to find, and you need to catch then with your net. He might be there without the ten medals, but you still need them for him to offer you the challenge which has a prize upon completion.
To get medals, I can't remember if you need over 100 rupees or just more rupees than your friends. Either way, you get the medals at the end of each level.