As it happens with most classic cocktails, their background is so obvious, but not quite accurate. This is exactly the case here. We know for sure it popped in Manhattan, but the exact time is vague. There are certain mentions throughout history that date before 1870s, but they're not true, because, as Dave of Home Bar Basics points out, Vermouth wasn't imported in the States until 1870.
Another story says it was invented for Winston Churchill's mother at a party, but again facts are spoiling the story, because she was in England at the time.
Now let's go back to Vermouth importing biz. Ok, it hit the streets in the seventies and at some point some lunatic (or a bunch of them) started adding it to different mixtures. Perhaps the same thing happened throughout the continent, but someone had the wits to name it so and popularized it.
Anyway I don't find drink history of much significance. Yes, it's important to have a notion about were someone's favorite drink came from, but let's not get too anal about it. At the end of the day is just a drink and is supposed to bring joy.

Foto: Urbanfever.ro

Manhattan:

Rye whiskey 2 oz
Sweet vermouth 1 oz
Angostura 2 dashes

• Coupe
• Stir Strain
• Cherry