The sterling alloy originated in Europe and was being used for trade as early in the 12th century in the area that is now Germany.
In England the composition of sterling silver was subject to official assay at some date before 1158 during the reign of Henry II, but its purity was probably regulated from centuries earlier, in Saxon times. A piece of sterling silver dating from Henry II's reign was used as a standard in the Trial of the Pyx (A procedure used to confirm newly minted coins met required standards) until it was deposited at the Royal Mint in 1843. It bears the royal stamp ENRI. REX ("King Henry") but this was added later, in the reign of Henry III. The first legal definition of sterling silver appeared in 1275, when a statute of Edward I specified that 12 Troy ounces (a Tryo ounce is about 31.1 grams) of silver for coinage should contain 11 ounces 2 1⁄4 pennyweights (1 pennyweight is about 1.56 grams) of silver and 17 3⁄4 pennyweights of alloy, with 20 pennyweights to the Troy ounce. This is (not precisely) equivalent to a millesimal fineness of 926.
In America, sterling silver was used for currency and general goods as well. Between 1634 and 1776, some 500 silversmiths created items in the “New World” ranging from simple buckles to ornate coffee pots. Although silversmiths of this era were typically familiar with all precious metals, they primarily worked in sterling silver. The colonies lacked an assay office during this time (the first would be established in 1814), so American silversmiths adhered to the standard set by the Londons Goldsmith Company, sterling silver consisted of 91.5 - 92.5% by weight silver and 8.5–7.5 wt% copper. Stamping each of their pieces with their persona Maker’s Mark, colonial silversmiths relied upon their own status to guarantee the quality and composition of their products.
Colonial silversmiths used many of the techniques developed by those in Europe. Casting was frequently the first step in manufacturing silver pieces, as silver workers would melt down sterling silver into easily manageable ingots. Occasionally, they would create small components (e.g. teapot legs) by casting silver into iron or graphite molds, but it was rare for an entire piece to be fabricated via casting. Next, silversmiths would forge the ingots into the shapes they desired, often hammering the thinned silver against specially shaped dies to "mass produce" simple shapes like the oval end of a spoon. This process occurred at room temperature, and thus is called “cold-working”. The repeated strikes of the hammer work hardened (sterling) silver, causing it to become brittle and difficult to manipulate. To combat work-hardening, silversmiths would anneal their pieces—heat it to a dull red and then quench it in water—to relieve the stresses in the material and return it to a more ductile state. Hammering required more time than all other silver manufacturing processes, and therefore accounted for the majority of labor costs. Silversmiths would then seam parts together to create incredibly complex and artistic items, sealing the gaps with a solder of 80 wt% silver and 20 wt% bronze. Finally, they would file and polish their work to remove all seams, finishing off with engraving and a maker’s mark.
The American revolutionary Paul Revere was regarded as one of the best silversmiths from this “Golden Age of American Silver.” Following the Revolutionary War, Revere acquired and made use of a silver rolling mill from England. Not only did the rolling mill increase his rate of production hammering and flattening silver took most of a silversmith’s time—he was able to roll and sell silver of appropriate, uniform thickness to other silversmiths. He retired a wealthy artisan, his success partly due to this strategic investment. Although he is celebrated for his beautiful holloware, Revere made his fortune primarily on low-end goods produced by the mill, such as flatware. With the onset of the first Industrial Revolution silver smithing declined as an artistic occupation.
From about 1840 to 1940 in the United States and Europe, sterling silver cutlery (US: 'flatware') became required when setting a proper table. There was a marked increase in the number of silver companies that emerged during that period. The height of the silver craze was during the 50-year period from 1870 to 1920. Flatware lines during this period sometimes included up to 100 different types of pieces.
A number of factors converged to make sterling fall out of favor around the time of World War II. The cost of labor rose (sterling pieces were all still mostly handmade, with only the basics being done by machine). Only the wealthy could afford the large number of servants required for fancy dining with ten courses. And changes in aesthetics resulted in people desiring simpler dinnerware that was easier to clean.
If you like this, read a history of birthstones.