Felting has been around for nobody really knows how long because fiber does not keep well like pottery, stone, metals, etc. According to the following websites, the art of needle felting was not "thought about" until the 1980's.
http://www.livingfelt.com/felt.html
http://www.wizpick.com/about_needlefelting.htm
"Needle Felting
The felting needle was invented for industrial use; to enhance and expand the felting process so that synthetic and plant fibers could be felted. The first needle loom produced on a commercial basis came from the Bi-Water Company of Leeds, England about 1866, but not until the late 1950’s did the needle punching industry start to expand with companies utilizing fibrous waste. Needle punched non wovens were first used as spring insulators in the mattress and furniture industry and later as car carpet. The needle punching industry increasingly uses the felting needle to texture woven and knitted fabrics.
In the early 1980’s David and Eleanor Stanwood used a barbed needle from an industrial felting factory to develop needle felting as a handcraft. They taught Ayala Talpat, who continued to promote the technique. Needle felting has progressively gained popularity amongst handcrafters, doll makers, bear artists, and artisans."
Ayala Talpat: http://www.fiberfanatics.com/default.html