The Open Game License allowed companies to use the d20 SRD as the basis for a game.
Troll Lord Games decided to make a ADnD RPG that called Castles and Crusade. During its development this was changed to be only ADnD compatible instead of a clone. It compatible in that you can take an original ADnD adventure or setting and use it as is and it will work with C&C.
Matt Finch and slightly later Stuart Marshall takes on writing OSRIC in the mid 2000s. They know IP lawyers and get them involved in the process. Their work relies on the twin pillars that the terms they need are open content because of the d20 SRD and that under US Law game mechanics can't be copyrighted. Their goal is to produce as close of a clone as they legally can. Their first editions was designed as a publisher reference/SRD to producing adventures and supplement.
Concurrently Chris Gonnerman produces Basic Fantasy which is a quasi-clone of BECMI DnD. However it doesn't have as great as an impact as OSRIC as it wasn't explicitly setup to allow third party publishing.
We are now in 2007.
In August Dan Proctor produces Labyrinth Lord a complete ready to run Retro Clone of B/X D&D.
In 2008 Matt Finch, one of the original authors of OSRIC, releases Swords and Wizardry a complete and ready to run clone of ODnD.
Finally in the fall of 2008 OSRIC itself is rewritten as a complete ready to run RPG as Version 2.
Before 2006 there were about 50 odd releases of various material supporting classic editions. In 3e world there was a back to the roots movement led by Goodman Games and Necromancer Games who were noted for writing old school adventures with new school rules.
These all count stuff targeted explicitly written for classic editions.
In 2006 this was nearly doubled with 48 releases.
In 2007 there was a small fall off to 44 releases.
In 2008 there was 76 releases.
In 2009 there was 125 releases
and keeps growing from there along with a huge growth in closely related games set in different genres like planet and swords or close in tenor and feel like the DCC RPG.
To recap the three factors that allowed the OSR to grow in to a substantial hobby niche are
- The huge body of people who played classic editions of DnD.
- The internet capability to allow niche communities to communicate and grow.
- The use of the Open Game License to RPGs to use the most of the same terms as classic editions.
- The inexpensive availability of Print on Demand technology.
The OSR is now a distinct niche of its own with it own industry side and hobby side similar to Fate, GURPS, Savage World, etc. Unlike the rest there is no dominant (Fate) or single (GURPS, Savage World, etc) publishers supporting it. It is solely supported by multiple publishers. This may change if Wizards decides to return to publishing older edition materials.
I know a lot of hard working publishers are not mentioned I encourage people to go to the Hoard and Horde timeline and check the dozens of excellent material that have been published over the years. Also do a search for OSR on Lulu and check out the OSR section on RPGNow.