My turn.
DC Comics built up a huge stable of characters starting in the late thirties, but a lot of them faded in popularity after the war. High-popularity characters like Superman, Batman and Wonder Woman reamined in constant publication but in the eary sixties, DC dusted off some other characters and greatly revamped them, changing their origins, costumes, secret identities, etc:
[ul][li]Flash: was Jay Garrick, now Barry Allen[/li][li]Green Lantern: was Alan Scott, now Hal Jordan[/li][li]The Atom: was Al Pratt, now Ray Palmer[/li][li]Hawkman: was Carter Hall, now Katar Hol (alien).[/li][/ul]
In the new Flash’s early stories, they established that Barry Allen had read comic books as a youth showing the adventures of a fictional Flash, named Jay Garrick. Then, later on, the Flash accidently breached some kind of dimensional barrier and found a “real” alternate dimension where Jay Garrick actually existed.
DC used this story to explain the dicontinuity between its 1940s and 1960s stories by claiming that parallel dimensions existed with slightly different histories. Arbitary names were given, with the “current” continuity being designated as Earth-1 and the 1940s continuity being Earth-2. A number of crossover stories followed, with members of Earth-1’s Justice League of Americaa interacting with Earth-2’s Justice Society of America. The first large-scale crossover between the JLA and JSA was a two-parter in Justice Leage of America #21-22 (1964) titled “Crisis on Earth-1” and “Crisis on Earth-2”.
This break is used to distinguish DC’s “Golden Age” (pre-update) from DC’s “Silver Age” (post update).
Since the Earth-2 continuity wasn’t critical, stories were written in which the golden-age Superman married Lois Lane (hence the “Mr. and Mrs. Superman” stories that appeared in Superman Family through the early eighties) and the golden-age Batman married Catwoman, producing a daughter (the Huntress).
DC had also acquired the rights to the various SHAZAM characters (Captain Marvel, Mary Marvel etc) and tucked them away on another alternate dimension, Earth-S. There was also an Earth-3 (all super-characters are villians) and Earth-C (all characters are sentient animals, including Captain Carrot and the Zoo Crew) etc.
The “Crisis” title was reused a few times, including “Crisis on Earth-Prime” and “Crisis on Earth-C+” etc. All of these stories involved characters hopping from one dimension to another. It became normal for a writer to just make up a parallel dimension whenever he wanted to satisfy a particular story.
In the early eighties, DC produced a series set on Earth-2 called All-Star Squadron. The series started in December, 1941 and featured just about every character they had at the time, including many that hadn’t been published since 1949 or so. The characters interacted with FDR and Winston Churchill, with WW2 as a backdrop. It was a highly-underrated series, I thought, though the later issues were just plain silly.
By the mid-eighties, the continuity had became so complicated that DC said, “screw it!” and decided to launch a 12-issue miniseries Crisis on Infinite Earths, the net effect would be squish all the parallel dimensions into one. This represented a huge amount of rewriting and retroactive continuity changes (hence “Pre-” and “Post-Crisis” and “retcon”). In the new history, for example, Superman had never been “Superboy” and was the sole survivor of Krypton (no Krypto, Supergirl, Phantom Zone, etc).
Even now, though, DC is producing stories that match the old continuity (calling some of them “Hypertime” stories, or simliar technobabble) because fans still wanted to read about Krypto and Red Kryptonite etc. It was never going to be possible to come up with a single realistic continuity, so DC continues to limp along and shrug when fans get excessively nitpicky.