In the beginning, there were no built-in humanoid avatars like there are today. The first avatar is said to have been a "purple orb". Whether this was simply a purple-tinted sphere or something more complex is unknown. An Avatar is a representative of a real person in the virtual world.
As development progressed, Linden Lab employees began to build their avatars out of primitives. The first skeletally-animated humanoid avatar was called the Primitar. Primitars were the avatars in the early stages of Second Life, when it was still called Linden World. A replica of the primitar is available for free at the Historical Museum.
It is said that the Primitar was the basis for the modern mesh-based system that was introduced in Alpha. In Alpha, there were a lot less sliders, and no support for long hair. The central slider setting of 50 on the height slider today corresponds to the Primitar's approximate height. The primitar is said to have been accidentally made a bit taller than the average human, which is why placing the sliders in the middle makes the avatar a bit taller than expected. If this is to be believed then it may also explain why the current avatars are taller than average.
Skirts were only introduced in 1.1; prior to that they had to be made out of primitives, which didn't look as good since they were solid and in a fixed position relative to the avatar's waist. Skirts were also the first additional mesh, separate yet attached to the primary avatar mesh, making skirts a test for potential additional meshes to be added onto avatars for other clothing options (or even other stuff).
With the 1.4 release, avatars gained much in the way of personalization through the use of resident-created animations and animation overriders. Instead of the canned, default animations used by all avatars, poses and "attitudes" could now be simulated. By 1.5, residents had created animations that simulated greater sizes (adding up to 5m in height for prim-based avatars) and different kinematics (e.g., quadruped avatars). A variation on this theme gave rise to the so-called "tinies" or "critters" avatars during 1.6 (summer, 2005). These avatars were made shorter than the minimum default height by virtue of folding up the extremities of each limb and locking them in place out of sight within the torso of the avatar.