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The earliest carousel is known from a Byzantine Empire bas-relief dating to around 500 A.D., which depicts riders in baskets suspended from a central pole. The word carousel originates from the Italian carosello and Spanish carosella ("little war"), used by crusaders to describe a combat preparation exercise and game played by Turkish and Arabian horsemen in the 1100s. In a sense this early device could be considered a cavalry training mechanism; it prepared and strengthened the riders for actual combat as they wielded their swords at the mock enemies. European Crusaders discovered this contraption and brought the idea back to own their lands, primarily the ruling lords and kings. There the carousel was kept secret within the castle walls, to be used for training by horsemen; no carousel was allowed out in the public. Eventually some small carousel rides were made and installed for royalty in their private gardens. Soon after that, with the pomp of France and circumstance of Paris a grand game was devised and played in Le Place du Carrousel. Along with a pageantry-filled jousting tournament it also consisted of "combatants" throwing clay balls filled with perfumed water at each other, thus those being hit would smell for days. A highlight of the carrousel was the ring-tilt, in which knights would attempt to spear suspended rings at full gallop.

As for the Turkish and Arabian horseman, a carousel was built around 1680 as a training device for the ring-tilt, consisting of wooden horses suspended from arms branching from a center pole. Riders aimed to spear rings situated around the circumference as the carousel was moved by a man, horse, or mule. With the development of craft guilds and the relative freeing up of the trades in Europe, by the early nineteenth century carousels were being built and operated at various fairs and gatherings in central Europe and England. For example, by 1837, wagonmaker Michael Dentzel had converted his wagonmaking business in what is now southern Germany to a carousel-making enterprise. Animals and mechanisms would be crafted during the winter months and the family and workers would go touring in their wagon train through the region, operating their large menagerie carousel at various venues. Other makers such as Heyn in Germany and Bayol in France were also beginning to make carousels at this time. In its own unique style, England was also rapidly developing a carousel-making tradition.
Early carousels had no platforms: the animals would hang on poles or chains and fly out from the centrifugal force of the spinning mechanism; these are called "flying horses" carousels. They were often powered by animals walking in a circle or people pulling a rope or cranking. By the mid-1800s the platform carousel was developed where the animals and chariots would travel around in a circle sitting on a suspended circular floor which was hanging from the centerpole; these machines were then steam-powered. Eventually, with the technological advances of the industrial revolution, bevel gears and offset cranks were installed on these platform carousels, thus giving the animals their well-known up and down motion as they traveled around the center pole. The platform served as a position guide for the bottom of the pole and as a place for people to walk or other stationary animals or chariots to be placed. Band organs were often present (if not built in) when these machines operated. Eventually electric motors were installed and electric lights added, giving the carousel its classic look.

From Wikipedia