Text Origins
For a long time the World Wide Web was composed primarily of text. HTML tags provided some basic formatting for paragraphs and relative font sizing. This first version of HTML was created by scientists and was not meant for exacting page layout.
The Rise
As the WWW started gaining popularity, more geeks (and I use the term endearingly) started to play with HTML. As a former scientist I can vouch for the fact that most of these guys don't have the greatest sense of esthetics. So as they started to get "creative" with design, the choices that were made could be called… questionable. This is how we ended up with cloud backgrounds, rainbow bars and animated GIFs of dancing cartoon animals.
The Fall
When the Internet started gaining popularity and widespread use in the mid 1990s, images were still rare and often of low quality. Digital cameras were just becoming available at low resolutions. File size was a real concern for web developers as 14.4 modems were the standard of the day. The first real web designers were faced with primitive tools and HTML was being pushed to its limits. Bandwidth restrictions made quality images a practical impossibility.
Of course this didn't stop people from using images. "Traditional" graphic designers created sites that relied heavily on images to get around the shortcomings of HTML. By using images, designers had complete control over typography and layout. The result was a slide show of still images. While these sites captured the designer's vision, they were very slow to load and were completely unusable to web surfers with accessibility needs (blind, etc.). There was also the gigantic repercussion these sites were almost completely invisible to search engines. Long load times and poor search engine performance has made this practice very rare.
The Rise
Once broadband Internet access began to permeate the market, giant images didn't seem like such a bad idea. Even video streams have become practical and expected over the Internet. While still largely invisible to search engines, image over use was no longer the bandwidth hog it had been. This has give rise to online photo services and photo sharing networks. This type of data exchange was unthinkable in 2000.
The Fall
Now, with the wide adoption of Cascading Style Sheets (CSS) there is finally a chance to format page layout without resorting to images. CSS doesn't provide the level of font control most designers want but we are closer than ever before. Pages can be formatted rather beautifully using only CSS techniques. By adding just a few well chosen images and CSS layout techniques, an entire site can be given an esthetically appealing design with code alone.
As a web developer, I've spent many years mocking up designs in Photoshop and then translating those concepts into web pages. Often many key images would be sliced-out of these PSD files and incorporated into the HTML layout. Now with CSS, many of the things which had to be created with images (navigation rollovers for example) can be created with a few well chosen lines of CSS. While CSS isn't perfect, it has re-prioritized the way I approach design. I find myself looking to build as much of a layout as possible using CSS. It's amazing to see how much more you can accomplish (from a design perspective) building a website with just code than you could a few years ago.
I know the arrival of CSS is old news, but it recently struck me that the adoption of CSS has fundamentally changed the way we approach web layout. CSS has become so practical and well documented (including the hacks) that web layout is in the hands of programmers just as much as it is in the hands of web designers.