Louis Jacques Mande Daguerre was born in France in 1787. By 1825, he was a successful commercial artist in Paris; creator, proprietor, and promoter of a giant illusionistic theater called the Diorama in which he used the camera obscura, among other tools, to create realistic backdrops for these sets.
During this same time period, fellow countryman, Joseph-Nicephore Niépce, was working to create plates that could be inked and printed, producing accurate reproductions of original works or scenes. Perhaps the best known of his "photograph" was created in 1826 and is a view from his studio window that took eight hours to expose. It is recognized as the world's earliest extant "photograph" and is preserved in the Gernsheim Collection of the Humanities Research Center at the University of Texas, Austin.
Niépce and Daguerre corresponded and eventually formed a partnership, working towards developing and commercializing their shared dream of photography. Niépce died in 1833 before practical success was achieved, but Daguerre continued their work and by 1837 had overcome the challenges.
Basically, his method consisted of treating silver-plated copper sheets with iodine to make them sensitive to light, then exposing them in a camera and "developing" the images with warm mercury vapor. On the basis of its novelty, and difference from the pewter-and-resin based systems developed by Niépce, Daguerre claimed the invention as his own by naming it "The Daguerreotype."
See also: Making the Positives: Daguerrotype