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Dictionaries are a recent invention. In some form, glossaries and word-lists have been around for centuries. Mostglossaries in the Middle Ages and Renaissance in Europe, however, were interlingual, or lists of specialized technical terms, or both. The medieval attitude was clearly that no-one would need a dictionary of common words in their native language. The idea that you would go to a book to find the spelling or the meaning of a word was alien to a largely oral society with no fixed system of orthography.
Interlingual dictionaries are still useful today, of course, as we have learned in looking at words in different languages. Yet it is still the moment of mastery in reading a foreign language when you move from an interlingual dictionary to a dictionary completely in the second language--one that forces you to move into defining words in terms of the words of the other language.
Yet this observation points up what we might call the "dictionary paradoxes": how do I look up the spelling of a word I don't know how to spell? How do I define the meaning of a word if I have to define it in terms of other words? Here, for instance, is part of Merriam-Webster's definition of "the":
1 a -- used as a function word to indicate that a following noun or noun equivalent is definite or has been previously specified by context or by circumstance . . . b -- used as a function word to indicate that a following noun or noun equivalent is a unique or a particular member of its class
What on earth does that mean? (A related question is, why on earth would anyone look up "the" in a dictionary?) In order to define a common word without using the word itself, dictionaries have to resort to the strangest kinds of locutions. Another kind of failing is evident in dictionary definitions for things that you just have to know in order to know what their names mean--what are called "lexical" nouns. Merriam-Webster defines "hackberry" as "any of a genus (Celtis) of trees and shrubs of the elm family with small often edible berries." That's wonderful except it doesn't help you in the slightest in identifying a hackberry tree. Most simple dictionaries are even less help. Suppose you want to know what the French word "chêne" means; you use your basic French dictionary and it says "espéce d'arbre": a kind of tree. Here the interlingual dictionary is more helpful than the "real" dictionary: "chêne" means "oak." But a series of lexical nouns in assorted languages--chêne, oak, quercus, Eiche--is useless without some experience of an oak tree, because of the arbitrariness of names.
Dictionaries do not then arise from a real need to understand language, but from a social need to codify language. The very first intralingual English dictionary, Robert Cawdrey's 1604 volume, did not codify language; it just listed some difficult English words and defined them in English. The first edition of Samuel Johnson's Dictionary (in 1755), however, is a watershed in the history of English wordlists because Johnson sought to codify meanings. He worked inductively, drawing examples of word meanings from literature. He supplied sample quotations to back up his definitions. He was also a great writer, with sense enough to know how to write interesting definitions, and sometimes included what we would call today in computing "Easter Eggs"--little jokes you have to know where to look for, like his definition of "oats": "A grain, which in England is generally given to horses, but in Scotland supports the people."
By 1755, there was a need in England not to understand the language better, but to standardize written expression in what was already turning into an "information age" of burgeoning international commerce, Empire, and an expanding literate middle class. People turned to Johnson's Dictionary to learn correct standards of written expression.
In 1828, Noah Webster, a New England lexicographer and entrepreneur, published his American Dictionary. This is one of the great American bestsellers; it is no exaggeration to say that by 1850 most literate households in New England, and many in the U.S. as a whole, owned some form of a Webster dictionary. Webster was so successful that his name is now in the public domain. Webster's is now a generic term for any American dictionary. The website I've just sent you to is an ad for Merriam-Webster, the company that is in the direct line of legal descent from Noah himself; but as their site makes clear, they do not have exclusive rights to the name "Webster." You would be perfectly within your rights to write a dictionary--even a lousy and inaccurate one--and sell it as "Webster's." Please remember this, especially next time you are tempted to cite a "Webster's" dictionary as gospel.
Dictionaries have a great impact on usage. Webster preferred to spell words like "colour" and "honour" without the "u," which he considered to be superfluous. As a result, we still spell them "color" and "honor" in this country, as opposed to the old British spellings.
The most exhaustive dictionary of the English language is the Oxford English Dictionary, which is also, as its first edition proclaimed, the first to make extensive use of "historical principles." The OED was assembled in the 19th century through the efforts of a horde of volunteer contributors marshaled together by Sir James Murray, the formidable editor who saw the OED through most of its publication. These contributors would send slips of paper with illustrative quotations for words to Murray, who assembled them in a purpose-built structure called the Scriptorium--a large hut full of pigeon-holes for the thousands of slips that arrived. From the pigeon-holes, Murray would draw out slips and write the final definitions (aided by an army of helpers, of course).
A typical OED entry looks like the ones available at the Word of the Day site reachable through the OED prototype pages.