Wikipedia says:
"The Internet is a global system of interconnected computer networks that use the standard Internet Protocol Suite (TCP/IP) to serve billions of users worldwide. It is a network of networks that consists of millions of private, public, academic, business, and government networks, of local to global scope, that are linked by a broad array of electronic, wireless and optical networking technologies. The Internet carries a vast range of information resources and services, such as the inter-linked hypertext documents of the World Wide Web (WWW) and the infrastructure to support electronic mail."
The internet was originally developed as a military project by DARPA, The Defense Advanced Research Projects Agency. It first it was called "Arpanet". Their goal was to build a wide area network that could survive unreliable connections. They wanted the Internet to be able to survive even a direct hit by a nuclear weapon on one of the main network centers, and still continue to function. For this reason the Internet has no real center.
A large part of the original backbone was also funded by the National Science Foundation. There was heaving involvement by American Univerisites and research organizations. USC, UCLA and Caltech were among the first. A large part of the software that runs the internet was developed at the Information Sciences Institute in Marina del Rey, which is loosely attached to USC. Jon Postel was the leader of this organization, and personally wrote much of the software that is currently used to manage the Internet, including DNS, which we will talk about shortly.
Originally the Internet was free. It was paid for by tax money from the US government. It's interesting that many of the companies that currently benefit from the Internet, like the large telephone companies, originally had nothing to do with it and were actually very late entrants into the Internet business, which was originally dominated by small companies like Netcom, AOL, and small local companies like Leonardo Internet, Brand X Internet, and LA Bridge.