Yahoo! was incorporated in 1994, essentially at the dawn of the web as a consumer destination. Stamford University grad students Jerry Yang and David Filo had created a hobbyist search engine in the previous year, and had accrued massive numbers of hits in a very short period of time. In the first few years of its operation, Yahoo! was the most popular search engine online, partly owing to its hybrid search algorithm. Real people crawled the web and weighted the searches to fit into categories.
In the early days of the web, that approach made a good deal of sense - there simply weren't enough web pages out there for fully automated searched to be really necessary. In addition, their primary competitors had not developed particularly good automated search algorithms - using engines like Excite, Altavista or Hotbot were more likely than not to turn up thousands of irrelevant searches for common terms. The human touch set Yahoo! apart from the others. In part because of increasing competition from other search engines - like Google - Yahoo! has since abandoned the guided approach, in part because both search engines and the web itself have matured to the point at which automated searching is the only practical option.
Yahoo! soon expanded to include a web e-mail service, a games portal and other parts of the business while providing news aggregation and financial information. For a good deal of time, Yahoo! Finance was the undisputed champion of providing up-to-date consumer news and stock quotes, so long as you don't count the Bloomberg terminals used by professionals.
The contributions of Yahoo! to the early development of the internet were more in the realm of social than technical influence. Yahoo! showed that search engines could be relevant and also helped to demonstrate the early viability of advertising-funded websites. The web mail client was one of the first technically stable ones, but Hotmail had beaten it to the punch by a full year. Despite this, Yahoo! Mail currently has the majority of global marketshare, in part because of the established brand but also because of their aggressive approach towards translating their software rapidly for the international market.
Yahoo! offers a set of business services including Web Hosting, search marketing services, and job listings. Yahoo! has also survived some uncertainty through the recent and lingering acquisition attempt by Microsoft.