All of the quotes and information used in the post can be found in Founders at Work by Jessica Livingston.
Craigslist was founded in early 1995 by Craig Newmark; it started as a simple e-mail list that grew exponentially over the next few years. Newmark, who worked in the tech industry, would send an e-mail full of what he considered "cool events" happening in the SF area to a list of friends. They would then send that list to their own friends, who would in turn want to be on the original "list," which became "Craig's List."
When the list of e-mails simply became too long, Newmark decided to put his list on the internet. He wanted to call it "SFEvents" or something simple but his friends insisted that he go a different route: craigslist.com. Why not? The name had already stuck. But that's not what Newmark settled on. Instead, he went for craigslist.org. Why? Because ".org" exudes a feeling of community and trust, something Newmark loves.
The story of how his business progressed is really amazing; after working all day, Newmark would work through the night hours on the website and has said that, "If I was billing for my own hours, it would have been a great deal of money." Essentially, he worked his ass off. It was still more of a hobby at that point but one he took great pride in.