I have read the sentence below:
He is on the swim team.
My questions are:
Why use the preposition "on" ? Can I use "in"?
What's the difference between "on" and "in "?
Can "the swim team" be replaced with "the swimming team"?
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In contemporary American usage, an athlete is always on a team, never in it. Similarly, a juror is on a jury, a bureaucrat sits on a committee, and a professor is on the faculty.
By contrast, a soldier is in the army, a politician is in the Senate, and a singer is in the choir. Some entities such as the army and the senate are thought of as corporate bodies that encompass their members. Others, such as athletic teams and juries, are thought of as panels on which the members serve. I can't explain why the difference exists, but it does.
So to answer your question: "He is on the swim team" is entirely correct; "he is in the swim team" would be wrong.
As for "swim" versus "swimming", I think that's an American vs. British issue. Americans say "swim team." They do not, however, say "fence team"--it's still "fencing team." Again, I can't explain why.
I'd say that in current British English usage, being "in the team" and "on the team" are equally acceptable.
I agree with other posters that "swim team" is US and "swimming team" is British, other examples being "row boat"/"rowing boat" and "race car"/"racing car". Another American usage, "athletics meet", seems to be gaining some foothold in British usage.
As an Australian (although I lived in UK until I was 11) I would say that in Australian English, being "on" or "in" the team are also both equally acceptable, perhaps with a slight leaning to "on" as more common.
Regarding the swim vs swimming debate I am afraid the usage of swim really jars with me, and probably with most older Australians, unfortunately it is now becoming very common here, a sign of the Americanisation of our language. (interestingly your spell checker tells me Americanisation should be spelled with a z not an s, but no thanks I will stick with the s)