History

The earliest forebears of hooked rugs were the floor mats made in Yorkshire, England during the early part of the 19th century. Workers in weaving mills were allowed to collect thrums, pieces of yarn that ran 9 inches (23cm) long. These by-products were useless to the mill, and the weavers took them home and pulled the thrums through a backing.

(More information - about development of the craft in North America - is here.)

This site (from which the photo of the weaving mill comes) continues:

Because yarn was expensive, and always saved for knitting sweaters, poor families without access to thrums usually made their hooked rugs using scraps of ordinary cloth. But no matter what fabric was used, the hooked rugs were more attractive than the common alternative at the time: inexpensive mats woven from coconut fiber, straw, or corn husks.

Photos of very old rugs are hard to come by - mostly they got used till they wore out!