The Rise of Desktops
In 1977 Apple was founded, and commenced selling the original Apple 1. They brought along innovations such as a color monitor and a graphical user interface to make it more user friendly. Further advances, such as the computer mouse made it all the more intuitive to use for consumers, furthering the usability and thus mainstream popularity of the desktop.
Early disk drive development, especially the floppy, made it possible to easily transfer data, and with it, software. Games, word processing programs, the primitive software enabled by the current hardware fueled consumer desire for ever-more complex software, and thus, hardware. A cycle of development formed, where the demand for more complex software fueled the demand for hardware that could handle it.
All the individual components that make up an individual desktop have been variously made completely modular, allowing for easy customization and upgrading on the behalf of the consumer, such as many Windows PCs, and completely integrated (“single unit"), allowing for greater convenience and a cheaper price, such as Apple's desktops. Which of these two paradigms will dominate is still in question.
For more on the history of the personal computer, check out this piece at ideafinder.com, or this one at eHow.com. Pc-history.org has a timeline with pictures of many old desktops.