It started all in 1969 with the development of UNIX. It was originally developed at Bell Laboratories as a private research project by a small group of people
(K. Thompson, Dennis M Ritchie, M. D. McIlroy, J. F. Ossanna), starting in 1969 after their lab withdrew from the MULTICS  project. When Multics was withdrawn Ken Thompson and Dennis Ritchie needed to rewrite an operating system in order to play space travel on another smaller machine (a DEC PDP-7 [Programmed Data Processor 4K memory for user programs).So they started to develop an Operating system.. The goals of the group were to design an operating system to satisfy the following objectives:

      Simple and elegant
      Written in a high level language rather than assembly language
      Allow re-use of code

The result was a system which a punning colleague called UNICS (Uniplexed Information and Computing Service)--an 'emasculated Multics'

UNIX had a relatively small amount of code written in assembly language (this is called the kernel) and the remaining code for the operating system was written in a high level language called C.

But UNIX itself was far more expensive. In quest of big money, the UNIX vendors priced it high enough to ensure small PC users stayed away from it. The source code of UNIX, once taught in universities courtesy of Bell Labs, was now cautiously guarded and not published publicly. To add to the frustration of PC users worldwide, the big players in the software market failed to provide an efficient solution to this problem.
A solution seemed to appear in form of MINIX. It was written from scratch by Andrew S. Tanenbaum, a Dutch professor who wanted to teach his students the inner workings of a real operating system. It was designed to run on the Intel 8086 microprocessors that had flooded the world market.
As an operating system, MINIX was not a superb one. But it had the advantage that the source code was available. Anyone who happened to get the book 'Operating System' by Tanenbaum could get hold of the 12,000 lines of code, written in C and assembly language. For the first time, an aspiring programmer or hacker could read the source codes of the operating system, which to that time the software vendors had guarded vigorously.

In 1991, Linus Benedict Torvalds was a second year student of Computer Science at the University of Helsinki and a self-taught hacker was working on MINIX But all that was lacking was an operating system that could meet the demands of the professionals. MINIX was good, but still it was simply an operating system for the students, designed as a teaching tool rather than an industry strength one.
At that time, programmers worldwide were greatly inspired by the GNU project by Richard Stallman, a software movement to provide free and quality software. In the early eighties, commercial software companies negotiated stringent nondisclosure agreements to protect their secrets.

But Stallman had a different vision. His idea was that unlike other products, software should be free from restrictions against copying or modification in order to make better and efficient computer programs. With his famous 1983 manifesto that declared the beginnings of the GNU project, he started a movement to create and distribute softwares that conveyed his philosophy (Incidentally, the name GNU is a recursive acronym which actually stands for 'GNU is Not Unix'). But to achieve this dream of ultimately creating a free operating system, he needed to create the tools first. So, beginning in 1984, Stallman started writing the GNU C Compiler (GCC), an amazing feat for an individual programmer considered as one of the most efficient and robust compilers ever created.

By 1991, the GNU project created a lot of the tools. The much awaited Gnu C compiler was available by then, but there was still no operating system. Even MINIX had to be licensed. Work was going the GNU kernel HURD, but that was not supposed to come out within a few years.
Then in August, 1991   Linus Trovalds uploaded his code of his operating system (Linux 0.01) on the university website and he had ported bash (1.08) and gcc (1.40) on his O.S and he received enormous response .the codes were downloaded, tested, tweaked, and returned to Linus. 0.02 came in October 1991.

And work went on. Soon more than a hundred people joined the Linux camp. Then thousands. Then hundreds of thousands. Powered by a good no. of programs from the GNU project, Linux was ready for the actual showdown. It was licensed under GNU General Public License, thus ensuring that the source codes will be free for all to copy, study and to change.
Soon, commercial vendors moved in. Linux itself was, and is free. What the vendors did was to compile up various software and gather them in a distributable format, more like the other operating systems with which people were more familiar. Red Hat , Caldera, Debian, and some other companies gained substantial amount of response from the users worldwide. With the new Graphical User Interfaces (like X-windows, KDE, GNOME)the Linux distributions became very popular. Now there are more than 200 Linux variants available
The best thing about Linux today is the fanatic following it commands. Whenever a new piece of hardware is out, Linux kernel is tweaked to take advantage of it. It has also been adapted for use in Alpha, Mac, PowerPC, and even for palmtops, a feat which is hardly matched by any other operating system. And it continues its journey into the new millennium, with the same enthusiasm that started one fine day back in 1991.

Linux Today

Proving all the warning and prophecies of the skeptics wrong, Linux has completed a decade of development. Today, Linux is one of the fastest growing operating systems in the history. From a few dedicated fanatics in 1991-92 to millions of general users at present, it is certainly a remarkable journey. But what's really amazing is the continuously increasing band of developers spread throughout the world who work with a fervent zeal to improve upon the features of Linux. The development effort is not, as many closed-sourced advocates accuse, totally engulfed with chaos. A well designed development model supervised by some maintainers is adopted. Along with this, there are thousands of developers working to port various applications to Linux.
With this added confidence, many large and small businesses have adopted Linux based servers and workstations as an integral part of their offices.