Linux started in 1991 as an experiment on the newly released (at that time) processor 80386, from Intel. The idea was to make a unix-like system run efficiently on a microcomputer. Unix was a very popular system -- and still is -- for large machines and for scientific/academic research.
Its author, Linus Torvalds, posted a message on usenet -- a former kind of world wide forum -- announcing he built the central part of a unix-like operating system and was making it available to anyone who would like to play with it. It was an adaptation of minix, a educational and limited version of Unix. The development since then was very quick, and as soon they were able to run programs, they could benefit from the large set of tools provided by the Gnu project1.1.
The Gnu project started a few years earlier by Richard Stallman of MIT. He decided to developed a full Unix clone under the concepts of free software, also his invention. The idea of `free' software is that one can copy, distribute and modify it as needed, without the restrictions of royalties or copyright violations, as a consequence, the programs are available for free -- one can charge for copying the program but not for the program itself.1.2