The Japanese and Korean started the tradition of gift wrap with furoshiki and bojagi, respectively. Ancient China also had their own version of the wrapping paper in 105 A.D. In fact, this era in China had its own version of wrapping paper that was paper and ink, not fabric like the Japanese and Korean versions - which are still in use today.
The practice lulled at this point. It stayed pretty much the same until the Upper Victorian age - around 1910 and 1911. Here, decorated paper with elegant ribbons and lace was used to decorate presents. The unwieldy and thick paper gave way to the tissue paper we know today in the early 20th century. Sturdy manila papers - like the manila folders today - were used by shops in those days to wrap packages until 1917 in the United States.
The wrapping paper we know today comes from this time in American history. Joyce and Rollie Hall, a pair of brothers in Kansas City, Missouri, owned a stationery store. They ran out of their standard tissue paper and needed to come up with a solution to their out of stock inventory. "Fancy French paper" came to their rescue. This was usually lining envelopes of the time period instead of being displayed prominently on gifts, bags, etc. So, they figured they had nothing to lose by displaying their "Fancy French paper" as gift paper atonlt $0.10 a sheet. They did well. So well, in fact, that the paper sold out almost instantly. To see if it had simply been a fluke, they did the same thing in 1918. By 1919, the brothers knew they had stumbled upon something good. They started printing their own gift paper to sell. Thus began the Hallmark brand we know today.
Why Do We Wrap Today?
Today, there are plenty of reasons why we wrap gifts. One reason is the sake of tradition. Think about it - have you ever received a gift that wasn't wrapped in some form? Whether it was a decorated brown lunch bag or professional wrapping paper or a bag, it was most likely wrapped. There's also the idea of concealing the gift so that the recipient has to guess what it is.
How many times have you seen something store bought in ugly packaging? Blister wrap, for example? Wrapping paper often helps to enhance the presentation of the present to the recipient. It shows them something pretty and opaque. After all, don't we all want to give them something pretty?