Like so much of our modern Christmas, we owe the invention of the cracker to the Victorians.
The first crackers were made by Tom Smith of London. Smith was a sweets maker who used to sell sugar almonds wrapped in twists of coloured paper, these were inspired by the "bon bons" he had seen in Paris. To increase sales in his store, he began to include little mottoes inside, rather like a fortune cookie. Later on, in 1847, Smith hit upon a method of making the "crack" mechanism.
This used saltpetre which was ignited by friction to produce the bang. In order for the cracking mechanism to fit, the size of the sweet had to be increased. This led to Smith eventually abandoning the sweets altogether and replacing them with surprise gifts.
This innovation proved very popular and became hugely successful. Smith originally called his new invention "Cosaques", apparently because the cracking sound reminded him of Cossack's whips. However this name gradually faded from use.
Smith's new crackers continued to grow in popularity and he eventually opened a factory to cope with manufacturing demands. Today there are a huge range of crackers on the market. At the cheapest end, the Christmas cracker has sometimes been ridiculed; it has a reputation for including an inane motto or appalling joke and a cheap plastic "gift" and not forgetting a brightly coloured paper hat! But for me, Christmas just isnt Christmas without fortune telling fish.