At the end of the 19th century the Austrian Erwin Perzy, a producer of surgical instruments, invented the so-called Schneekugel (snow globe) and got the first patent for it. Originally his goal was to develop an extra bright lightsource for use as a surgical lamp. As he tried to intensify the candlepower of a so-called Schusterkugel (a water filled flask used to focus light since the Middle Ages) with particles made out of different materials for reflection purpose, the effect reminded him of snowfall and it's said that by this he got the idea for a snow globe. He then built his first actual globe with the basilica of Mariazell as a model in it.

Because of the great request for his snow globes, Perzy, along with his brother Ludwig opened a shop in Vienna, where the production continues until today as a family business. Today the globes get exported throughout the world; the material out of which the "snow" is made is handed down from generation to generation as a production secret (it should float as long as possible in the water before sinking down).

In the United States, the first snow globe-related patent was granted in 1927 to Joseph Garaja of Pittsburgh, Pennsylvania. In 1929, Garaja convinced Novelty Pool Ornaments to manufacture a fish version underwater.

More Info: en.wikipedia.org