A Brief History of Japanese Animation

Origins

In 1918, an anime short titled Momotaro (Peach Boy) was created based on the Japanese folk tale of the same name. The first feature length anime film was Momotaro's Divine Sea Warriors (1945) which was produced during World War II as a propoganda film.
Toei Animation and Mushi Productions

In 1956, Toei Animation was founded and produced the first color anime feature film, The Tale of the White Serpent, which was released in 1958. This film was more Disney in tone than modern anime with musical numbers and animal sidekicks. It was released in the US as Panda and the Magic Serpent. Throughout the 1960s and into the early 1970s Toei continued to release these Disney-like films. Toei's style was also characterized by an emphasis on each animator bringing his own ideas to the production. The most extreme example of this being Takahata Isao's film Horus: Prince of the Sun (1968). Horus is often seen as the first major break from the normal anime style and the beginning of a later movement of "auteuristic" or "progressive anime" directors such as Hayao Miyazaki and Mamoru Oshii (the film involved Miyazaki as Scene Designer).
A major contribution of Toei's style to modern anime was the development of the "money shot". This cost-cutting method of animation allows for emphasis to be placed important shots animating them much fuller than the rest of the animation in the work (which would often be limited animation). Toei animator Yasuo Otsuka began to experiment with this style and developed it further as he went into television.
Osamu Tezuka started a rival production company called Mushi Productions. The studio's first hit Astro Boy became the first widely popular anime television series in 1963. Contrary to popular belief, Astro Boy was not the first anime series broadcast in Japan, an honor that falls to Manga Calendar which began broadcasting in 1962. However, Astro Boy was the first series to feature regular characters in an ongoing plot. American television, which was also still in its infancy and searching for new programming, rewrote and adapted Astro Boy for the United States in 1964. The success of Astro Boy in Japan opened the doors for many more anime titles to be created, including Mitsuteru Yokoyama's Tetsujin 28-go (later released in the U.S. as Gigantor), Tezuka's Kimba the White Lion and Tatsuo Yoshida's Mach Go Go Go (later released in the U.S. as Speed Racer).
By the late 1960s anime began to branch out into new areas. Tezuka began with several adult oriented films known as Animerama films. These films are characterized by eroticism and artistic experimentation. The three films are 1001 Nights (1969), Cleopatra (1970), and Belladonna of Sadness (1973). Belladonna is the most experimental of the three, providing an inspiration for the later work Revolutionary Girl Utena (1997). In addition the first adult oriented TV show Lupin III (1971) was broadcast around this time.
The 70s

During the 1970s, the Japanese film market fell apart due to competition from television. In addition, Mushi Pro went bankrupt spreading many animators into new studios such as Madhouse Production and Sunrise. As a result of these two events many young animators were thrust into the position of director before they would have normally taken the position. This allowed for a wide variety of experimentation.
A big example of this experimentation is with Isao Takahata's 1974 television series Heidi. This show was originally a hard sell because it was a simple realistic drama aimed at children. Most tv networks thought the tv show wouldn't be a success because children usually needed something more fantastic to draw them in. "Heidi" wound up being an international success being picked up in many european countries and becoming popular there. In Japan it was so successful that it allowed for Miyazaki and Takahata to start up a series of literary based anime called World Masterpiece Theatre. Even though Miyazaki and Takahata left in the late 1970s this series lasted until the mid-1990s.
Another genera known as mecha came into being at this time. Some early works include Mazinger Z (1972-74), Gatchaman (1972-74), Space Cruiser Yamato (1974-75) and Mobile Suit Gundam (1979-80). These titles showed a progression in the science fiction genre in anime, as shows shifted from more superhero-oriented, fantastical plots to relatively more realistic space operas with complex plots and fuzzier definitions of right and wrong. One famous example would be that of Char Aznable from Mobile Suit Gundam who changed from antagonist in the original series to tenuous ally in the sequel series, Zeta Gundam and back to the villain for the movie Char's Counterattack.
The Golden Age of Anime

This shift towards space operas became more pronounced in the late 1970s due to the commercial success of Star Wars. This allowed for the early space opera "Space Battle Cruiser Yamato" to be revived in a theatrical version. This theatrical version of Yamato is seen as the basis of the anime boom of the 1980s, referred to as the Golden Age of Anime.
Two events happened at the time of this shift from superhero Giant Robots to elaborate Space Operas. A subculture in Japan (who later called themselves Otaku) began to develop around animation magazines such as Animage or later Newtype. These magazines cropped up in responce to the overwhelming fandom that developed around shows such as Yamato in the late 1970s.
In addition a major component of anime from a technical perspective developed with Yoshinori Kanada an animation director (who worked on Yamato) who allowed individual key animators working under him to put their own style of movement as a means to save money. In many more "auteristic" anime this formed the basis of an individualist animation style that is unique to Japan (in commercial animation). In addition Kanada's animation was inspiration for Takashi Murakami and his Superflat art movement.
In the United States the popularity of Star Wars had a similar (but much smaller) effect on the development of anime. Gatchaman was reworked and edited into Battle of the Planets in 1978 and again as G-Force in 1986. Space Cruiser Yamato was reworked and edited into Star Blazers in 1979 and finally, and perhaps most infamously, Robotech (1985) was created from three anime titles, Macross, Southern Cross and Mospeada. The first organized American "otaku" developed as fans of these series.
The Otaku culture became more pronounced with Mamoru Oshii's adaptation of Rumiko Takahashi's popular manga Urusei Yatsura 1982. Yatsura would allow Takahashi to become a household name in anime despite her humble origins as a doujinshi artist. As for Oshii he would begin to break away from fan desires and expectations and take a more auteuristic approach with his 1984 film Urusei Yatsura 2: Beautiful Dreamer. This break with the otaku culture would allow Oshii to experiment much further later in his career.
The Otaku subculture began to have an effect on people who were entering the industry around this time. The most famous of these people were the amateur production group Daicon Films which would become Studio Gainax. Gainax began by making flims for the Daicon Scifi conventions and were so popular in the otaku community that they were given a chance to helm the biggest budgeted anime film (at that time) Wings of Honneamise (1987).
One of the most influential anime of all time Nausicaa of the Valley of Wind (1984) was made during this time period. The film gave extra prestige to anime allowing for many experimental and ambitious projects to be funded shortly after its release. It also allowed for its director Hayao Miyazaki and his long time colleague Isao Takahata the ablity to setup their own studio under the supervision of former Animage editor Toshio Suzuki. This studio would become known as Studio Ghibli and its first film was Castle in the Sky (1986).
Around the same time as Nausicaa a new medium was developed for anime the OVA. These OVAs were direct-to-home-video series and or movies that catered to much smaller more niche oriented audiences. The first OVA was Moon Base Dallos' (1983-1984) and it was directed Mamoru Oshii. This OVA was a flop, but Megazone 23 (1985) was the first real success in this market. Shows such as Patlabor had their beginning in this market and it proved to be a way to test less marketable animation against audiences.
The period in the late 1980s from 1984 onwards saw an increading number of high budget and/or experimental films. In 1985 Toshio Suzuki helped put together funding for Oshii's experimental film Angel's Egg (1985). The OVA market allowed for short experimental pieces such as Take the X Train, Neo-Tokyo, and Robot Carnival(all three 1987).
Theatrical releases became more ambitious each film trying to outclass or out spend the other film all taking cues from Nausicaa's popular and critical success. Night on the Galatic Railroad (1985), Tale of Genji (1986), and Grave of the Fireflies (1987) were all ambitious films based off of important literary works in Japan. Films such as Char's Counterattack 1988 and Arion (1986) were lavishly budgeted specticles. This period of lavish budgeting and experimentation would reach its zenith with two of the most expensive anime film productions ever: Wings of Honneamise (1987) and Akira {1988}.
Most of these films didn't make back the money that it cost to produce them. Both Akira and Wings of Honneamise when they were first shown in Japan flopped. As a result large numbers of anime studios closed down, and many of experimental productions began to be favored less over tried and true formulas. Only Studio Ghibli was to survive a winner of the many ambitious productions of the late 1980s with its film Kiki's Delivery Service (1989) being the top grossing film for that year earning over $40 million at the box office.
Despite the failure of Akira in Japan, it brought with it a much larger international fanbase for anime. When shown overseas the film was a cult hit that would eventually become a symbol of the medium for the west. The domestic failure and international success of Akira, combined with the bursting of the bubble economy and Osamu Tezuka's death in 1989, brought a close to the era.
The 90s to present

After this boom some people perceived a decline in overall quality of anime. Budgets fell and many ambitious projects weren't funded. There was a brief renaissance after the success of Hideaki Anno's Neon Genesis Evangelion (1995) but things still aren't going very well in the Japanese market. Most of the attention and consequently the more ambitious projects are being aimed for the west. Starting in 1995 with Macross Plus, Memories, and most famously Ghost in the Shell (1996), there was a rush to get a prestigious large budget anime film to US audiences. Memories was unable to be released even though it was intended for international audiences because the liscensor in Japan wanted too much money for the American distrobution rights.
The Aum Shinrikyo cult seirn gas attacks in 1995 were a major blow to the otaku culture. This group had some pop-culture affiliation and the otaku were blamed for the incident. In the same year Hideaki Anno directed what is probably the most controversial anime show ever written, Neon Genesis Evangelion. This show became increadibly popular in Japan reaching record numbers of people for an anime TV show. Anno originally wanted the show to be the ultimate otaku anime, but midway through production made it a savage critique of the culture eventually culminating in the controversial but quite successful (it grossed over $10 million) film End of Evangelion (1997). Anno would eventually get so fed up with the anime industry that he'd go on to produce live action films.
Many scenes in the Evangelion TV show were so controversial that it forced TV Tokyo to clamp down on censorship of violence and sexuality in anime. As a result when Cowboy Bebop (1998) was first broadcast it was shown heavily edited and only half the episodes were aired. The censorship crack down has relaxed a bit, but Evangelion had a major effect on the television anime industry as a whole.
In addition Evangelion started up a series of so-called "post-evengelion" shows. Most of these were Giant Robot shows with some kind of religious or purposely "difficult" plot. These include Raxhephon, Brain Powerd, and Gasaraki. Another series of these are late nigh experimental tv shows. Starting with Serial Experiments Lain (1998) late night Japanese television became a forum for experimental late night anime with other shows following it such as Boogiepop Phantom (2000), Texhnolyze (2003) and Paranoia Agent (2004).
An art movement started by Takashi Murakami that combined japanese pop-culture with postmodern art called Superflat came into being around this time. Murakami assert that the style is an analysis of post-war Japanese culture through the eyes of the otaku subculture. His desire is also to get rid of the categories of 'high' and 'low' art making a flat continuium hence the term 'superflat'. His art exhibitions are very popular and have an influence on some anime creators particularly those from Studio 4C.
The late 1990s and 2000s saw the increased acceptance of anime in overseas markets. Cowboy Bebop was widely popular in Japan and attracted attention in the West. Miyazaki's Spirited Away shared the first prize at the 2002 Berlin Film Festival and won the Academy Award for Best Animated Feature in 2003, and Oshii's Innocence: Ghost in the Shell was featured at the 2004 Cannes Film Festival.