Henry Chadwick is credited with first devising the statistic. It caught on as a measure of pitching effectiveness after relief pitching came into vogue in the 1900s. Prior to the 1900s, every pitcher was expected to pitch a complete game (and, in fact, for many years afterward). After pitchers like Otis Crandall and Charlie Hall made names for themselves as relief specialists, gauging a pitcher's effectiveness became more difficult using the traditional method of tabulating wins and losses. The National League first kept official earned run average statistics in 1912 (the statistic was called "Heydler's Statistic" for a while, after then-NL secretary John Heydler), with the American League following suit afterward.
Modern-day baseball encyclopedias give ERAs for earlier years, of course, but these were computed after the fact. Negro League pitchers are often rated by "RA", or total runs allowed, since the statistics available for Negro League games did not always distinguish between earned and unearned runs.
As with batting average, the value of a good ERA varies from year to year. In the 1910s, a good ERA was below 2.00 (two earned runs allowed per nine innings). In the late 1920s and 1930s, as might be expected, a good ERA was below 4.00; only a pitcher of the caliber of Dazzy Vance or Lefty Grove would post an ERA under 3.00 consistently during those years. In the 1960s, sub-2.00 ERAs returned. Today, an ERA under 4.00 is again considered exceptional, although pitchers like Pedro Martinez and Greg Maddux stand out today as Grove and Vance did in their day.
The all-time single-season record for lowest ERA in a season is 0.86, set by Tim Keefe in 1880. The modern record is 1.12, set by Bob Gibson in 1968. The lowest single-season ERA of an active pitcher is 1.56, achieved by Greg Maddux in 1994. The career record is 1.82, held by Ed Walsh, and the active player with the lowest career ERA is Pedro Martinez with an ERA of 2.62 through the 2002 season.
In modern baseball, an ERA under 2.00 is considered exceptional and is rare. An ERA between 2.00 and 3.00 is also considered great and is only achieved by the best pitchers in the league. ERA between 3.00 and 4.00 is above-average. An ERA between 4.00 and 5.00 is average; the majority of pitchers have an ERA in this range. An ERA above 5.00 is generally considered below-average, and a pitcher with an ERA above 6.00 for a prolonged period of time is usually in danger of losing his job.
It can be misleading to judge relief pitchers solely on their ERA, since a pitcher is responsible only for the runs scored by batters who reach base off them. If a relief pitcher enters the game, with his team leading by one run and with 2 outs in the inning, with the bases loaded, and gives up a single which scores two runs, he is not charged with those runs. If he retires the next batter, his ERA for that game would be 0.00, despite having surrendered the lead.