This is going to sound absolutely ridiculous, but something that happened this morning made me think of it. There are creatures that have good perception of emotions and intents of other creatures -- like dogs that are able to tell a friendly person from an unfriendly person, and who cannot be fooled by feigned pleasant behavior. One can only presume that they are able to discern cues from the person approaching them -- body language, tone of voice (quite possibly including tones and pitches we cannot hear in our own voices), even scent. There's nothing metaphysical about it; it's merely within the capacity of their natural senses to perceive this. Not all dogs are good at this -- some never were taught or needed to hone the ability -- but some are uncannily perceptive in telling for from friend.
Not to dismiss Legate's intriguing take on things, but perhaps this ability to discern an Elf-friend from... er... Elf acquaintances comes from their naturally keener senses and other mind-related abilities. As with humans, some have better perceptional skills than others. The naming of Elf-friend could be simply an honorific (though not lightly bestowed), but it could also be something able to be "seen" by Elves whose perceptivity is exceptionally strong. If all Elves could see and sense the things they do, all Elves would know on sight that these people are friendly to Elves to a more than casual degree, but since they can't, the bestowal of the "title" (and its subsequent announcement to other Elves) allows those Elves who do not have these particular skills know that these non-Elves are their allies.
I'm not sure that the conferral of the title makes it instantly perceptible to all Elves. I have to wonder if Haldir and his brothers would have known that Frodo was an Elf-friend if they hadn't been told by Galadriel.
Just my two cents, once again. Blame the neighbor's dog.
