Henry Ford, always looking to turn a quick buck, noticed a large amount of his money being wasted on wood used in the manufacturing process of his model A cars. Looking for some way to use this wood profitably, he hit upon the idea of making charcoal briquettes from all that scrap. The process of making them was easy and cheap and he could sell them to steel mills and anyone else needing a cheap fuel source.
Very quickly people started using them for heat and cooking, and hence the modern charcoal grill was invented. Well, not really that simple, but Ford certainly helped make outdoor charcoal cooking easier and more popular. Ford passed on the business to a relative named Kingsford and the rest is history.
Ford, did not however, invent charcoal. He didn't even invent the charcoal briquette. The inventor of the process for making charcoal briquettes was actually Ellsworth B. A. Zwoyer, whose business ultimately failed. Ford took the idea (possibly without paying a penny for it) and started his own business. Charcoal produced in this way is made from sawdust left over from the milling of wood. It is then mixed with a binding agent and formed into cute little blocks and fired in an oxygen-free furnace. Most of the binder burns away in the firing, but purists will tell you that some is always left over and that it can add it's own flavor to whatever you are cooking.
Some charcoals are now sold as self-lighting. Meaning that they have a lighter fluid already added. This can also add its own flavor to food. To get away from these additives you need to spend some extra money and get charred wood blocks commonly called lump charcoal. These are made, usually from an expensive hardwood, cut into small blocks and then fired to a nice charcoal state.
Charcoal has been made throughout the world for thousands of years. The usual process is to pile long pieces of wood in the shape of a large cone. Bury the wood with dirt, leaving a chimney hole at the top and a few air hole at the bottom. Light the wood from the bottom and let burn for several days. This is a long and slow process, but to yield charcoal and not ash you need to burn the wood very slowly and thoroughly. As you might guess this is an art form. Once the wood is burned to a good charcoal state, cover all the holes and let it cool. If you do it right you should get about 20% of the wood back as charcoal. Sound hard and unrewarding? Well it is, but before coal mining became an industrialized and practical process, it was about all people had to work with.
So what do you do if you don't want to spend a lot on charcoal, but you're not quite up to the task of making your own? First, don't buy self-lighting charcoal. Second, light your charcoal in a charcoal chimney or similar device. This uses newspaper instead of lighter fluid and also allows you to light and add charcoal to your fire without adding fluid to the grill. This follows the rule of never, and I mean never, add lighter fluid to already lit coals.
Not only can it be dangerous, but it'll give you food that tastes like lighter fluid. Third, always allow your coals to burn to a complete ashy surface before you start cooking. This ensures that any glues and additives are burned off before you start cooking. The drawback on this is that one of the better tips to doing a long smoke with charcoal is to only light about half the charcoal before you start the smoke. Over time, the hot coals will start the unlit coals burning and stretch out your smoking time. To get around this, invest in a coal bucket or some other heavy metal container. Once you start losing heat you can dump out the burning coals and start a fresh batch while you keep the food warm in the oven. Or you can just get the solid wood stuff.