The invention of play dough was a fortunate accident. Way back in the 1930s, Noah McVicker created a substance that looked like putty. It was made out of flour, water, salt, boric acid, and mineral oil. His family's soap company, Kutol Products, which was located in Cincinnati, Ohio, marketed this new creation as wallpaper cleaner.

McVicker's special putty-like substance was an excellent wallpaper cleaner. Because it did not contain any toxic chemicals, it could be reused and would not stain the wallpaper. Eventually, school teachers learned that this wallpaper cleaner could be used by kids as a modeling compound to make art and craft projects.

When Joseph McVicker, Noah McVicker's nephew, joined the soap company, he learned that their wallpaper cleaner was being used in local elementary schools for arts and crafts. Joseph thought it would be a good idea to give the product a new name (Play-Doh). This was done, and the product was marketed to schools, teachers, and department stores (Macys and Marshall Field's).

Play-Doh as a new product for kids was an immediate success. In 1956, the McVickers started the Rainbow Crafts Company to specifically make and sell Play-Doh.

More Info: en.wikipedia.org