This phrase, most popular as a typing phrase alongside “The quick brown fox jumps over the lazy dog”, came from a demonstration of the type-writer by Latham Sholes et al. to Charles Weller, the superintendent of the local (i.e. Wisconsin) Union Telegraph Office in 1867. (NB. Weller’s assistant, who was called in to give his view on the demonstration, was a very young Thomas Edison.)
Stuck for a phrase to show the power of the machine, Weller’s suggestion was lifted from an article in that morning’s local newspaper. Now to find the newspaper …….
Ref: The Typewriter in Wisconsin by Frederic Heath.
UPDATE 2: Gale contains a database of 19th American Newspapers. The newspapers in Milwaukee at the time were the Milwaukee Daily Sentinel and the Milwaukee News, both of which Sholes had been editor of.
UPDATE 2: The relationship between Weller and Sholes began when, in July 1867, Sholes went to the telegraph office where Weller worked looking for a piece of carbon paper, which was at the time very rare. On enquiring from Sholes what it was wanted for, Sholes invited him to the Kleinstuber machine workshop, what we would nowadays call an inventors’ hothouse.
Weller’s visit to the workshop became a demonstration of a single letter, the letter w, on what is described as a ‘crude experimental affair rigged up with a single key.’ It was further explained that this mechanism was to be expanded to include all letters of the alphabet. Soon after this demonstration Weller is noted to have moved to St Louis to take up a post as a short-hand reporter. However the relationship between Sholes and Weller continued with Weller become a tester of the many prototype machines (somewhere between 20 and 30 machines were created by Sholes, Glidden and Soule between 1867 and 1872).
Weller was a early typewriting machine tester alongside James Ogilvie Clephane, a shorthand reporter in Washington DC, and E. Payson Porter, a telegraph operator and expert from Western Union Telegraph Company of Chicago, Illinois.
Ref: Herkheimer County Historical Society, The Story of the Typewriter, 1873-1823, NY: Herkheimer: 1923.

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11 March 2008 at 12:40 am
Anonymous
Speaking of the typos, the correct version of first sentence quoted is: “The quick brown fox jumps over the lazy dog.” This is important because that sentence contains every letter of the alphabet, but if the word “jumped” is used, it’s missing the S.
20 April 2009 at 7:58 pm
Anonymous
“dog” is commonly pluralized to “dogs”, thus including the “S”.
20 April 2009 at 11:19 pm
J.C.
thanks anon. updated post to include the missing ’s’ – but changed jumped to jumps.