It started in 2008 when a design paper titled "Bitcoin - A Peer to Peer Electronic Cash System" was submitted by a Satoshi Nakamoto to a forum about cryptography. The first block ("The Genesis Block" or "Block 0") was mined in 2009. The first value it was given was 1 USD = 1,309.033 bitcoin (the exchange rate was computed by calculating for the electricity consumption that a computer used to mine bitcoin). The first transaction was in 2010.

As for how it became such a big thing, it was probably cause it was something new and exciting. And then as more people got into it, it got to be more popular. It remains to be such a big thing because of the tight-knit community that it has and the worldwide news that is spread about it everyday.