In 1997, Wizards of the Coast, a subsidiary of Hasbro, bought the Dungeons & Dragons license from TSR. They hired game designers to develop a new set of rules, commissioned artists and published a "Third Edition".
The stroke of genius behind Third Edition was the Open Gaming License. It was a public copyright license that made it legal for anyone to use, copy, modify or talk about the rules of their game, which they called "d20". That meant that anyone who wanted to make a game or book for Dungeons & Dragons could do so, with few exceptions. Hundreds of books were published to support Third Edition. High caliber licensed works like The Wheel of Time RPG the pet projects of game design super stars, creative settings like Nyambe, and horrible unlicensed slash-fiction games based on Naruto or My Little Pony. The market was saturated in these "d20" products "for use with the worlds most famous Role Playing Game".
|Thankfully Shadowrun never converted to d20|
A biproduct of the market being saturated in quickly produced, shitty supplements was that D&D's parent company felt its share of the shit-pie was being whittled away by the legal-produced knock-offs. Their solution was to release a new edition, this time without a OGL, and begin anew with a whole new set of rules. They hired game designers, commissioned artists, and published their new game.
Problem with their new game was that a lot of their old fans did not like it because it was not Third Edition. They had spent years with Third Edition and the various d20 supplements! Then came Paizo riding in.
Paizo was the company that produced and published the official Dungeons & Dragon's magazine until Wizards of the Coast announced they would be discontinuing the magazine in favor of more "online support" of the new 4th Edition. Paizo's response was to take all their contacts they had developed when dealing with the Wizards of the Coast Dungeons and Dragons design and production team and make a new book.
That new book was Pathfinder. They tapped a huge community of fans, tweaked some rules, and adopted the Third Edition d20 ruleset as their own. The book is better designed than the original Third Edition Dungeon and Dragons Rulebooks, with clearer rules and more consistent art. Paizo still releases small supplements for Pathfinder and the d20 rule sets, but at a slower pace.
That is it.