This paper addresses the problem of distributed state estimation in formations of vehicles with time-varying measurement topology. One or more vehicles have access to measurements of their own state, while the rest must rely on measurements relative to other vehicles in the vicinity and limited communication to estimate their own state, and it is assumed that the vehicles may gain or lose access to some measurements over time. The proposed solution consists in the implementation of a local state observer on-board each vehicle, and the effects of changes in the measurement topology on the estimation error dynamics are studied resorting to switched systems theory. Sufficient conditions for exponential stability of the global estimation error dynamics are presented for two different switching laws. The results are applied to the practical case of a formation of Autonomous Underwater Vehicles (AUVs), and simulation results are presented that validate the proposed solution.