The hereditary peerage, as it now exists, combines several different English institutions with analogous ones from Scotland and Ireland.
English Earls are an Anglo-Saxon institution. Around 1014, England was divided into shires or counties, largely to defend against the Danes; each shire was led by a local great man, called an earl; the same man could be earl of several shires. When the Normans conquered England, they continued to appoint earls, but not for all counties; the administrative head of the county became the sheriff. Earldoms began as offices, with a perquisite of a share of the legal fees in the county; they gradually became honours, with a stipend of £20 a year. Like most feudal offices, earldoms were inherited, but the kings frequently asked earls to resign or exchange earldoms. Usually there were few Earls in England, and they were men of great wealth in the shire from which they held title, or an adjacent one, but it depended on circumstances: during the civil war between Stephen and the Empress Matilda, nine Earls were created in three years.
William the Conqueror and Henry II did not make Dukes; they were themselves only Dukes of Normandy or Aquitaine. But when Edward III of England declared himself King of France, he made his sons Dukes, to distinguish them from other noblemen, much as Royal Dukes are now distinguished from other Dukes. Later Kings created Marquesses and Viscounts to make finer gradations of honour: a rank something more than an Earl and something less than an Earl, respectively.
When Henry III or Edward I wanted money or advice from his subjects, he would order great churchmen, earls, and other great men to come to his Great Council (some of these are now considered the first Parliaments); he would generally order lesser men from towns and counties to gather and pick some men to represent them. The English Order of Barons evolved from those men who were individually ordered to attend Parliament, but held no other title; the chosen representatives, on the other hand, became the House of Commons. This order, called a writ, was not originally hereditary, or even a privilege; the recipient had to come to the Great Council at his own expense, vote on taxes on himself and his neighbours, acknowledge that he was the king's tenant-in-chief (which might cost him special taxes), and risk involvement in royal politics – or a request from the king for a personal loan (benevolence). Which men were ordered to Council varied from Council to Council; a man might be so ordered once and never again, or all his life, but his son and heir might never go.
Under Henry VI of England, in the 15th century, just before the Wars of the Roses, attendance at Parliament became more valuable. The first claim of hereditary right to a writ comes from this reign; so does the first patent, or charter declaring a man to be a Baron. The five orders began to be called Peers. Holders of older peerages also began to receive greater honour than Peers of the same rank just created.
If a man held a peerage, his son would succeed to it; if he had no children, his brother would succeed. If he had a single daughter, his son-in-law would inherit the family lands, and usually the same Peerage; more complex cases were decided depending on circumstances. Customs changed with time; Earldoms were the first to be hereditary, and three different rules can be traced for the case of an Earl who left no sons and several married daughters. In the 13th century, the husband of the eldest daughter inherited the Earldom automatically; in the 15th century, the Earldom reverted to the Crown, who might regrant it (often to the eldest son-in-law); in the 17th century, it would not be inherited by anybody unless all but one of the daughters died and left no descendants, in which case the remaining daughter (or her heir) would inherit.
After Henry II became the Lord of Ireland, he and his successors began to imitate the English system as it was in their time. Irish Earls were first created in the 13th century, and Irish Parliaments began later in the same century; until Henry VIII declared himself King of Ireland, these Parliaments were small bodies, representing only the Irish Pale. A writ does not create a peerage in Ireland; all Irish peerages are by patent or charter, although some early patents have been lost. After James II left England, he was King of Ireland alone for a time; three creations he ordered then are in the Irish Patent Roll, although the patents were never issued; but these are treated as valid.
The Irish peers were in a peculiar political position: because they were subjects of the King of England, but peers in a different kingdom, they could sit in the English House of Commons, and many did. In the 18th century, Irish peerages became rewards for English politicians, limited only by the concern that they might go to Dublin and interfere with the Irish Government.
Scotland evolved a similar system, differing in points of detail. The first Scottish Earldoms derive from the seven mormaers, of immemorial antiquity; they were named Earls by Queen Margaret. The Parliament of Scotland is as old as the English; the Scottish equivalent of baronies are called lordships of Parliament.
The Act of Union 1707, between England and Scotland, provided that future peerages should be peers of Great Britain, and the rules covering the peers should follow the English model; because there were proportionately many more Scottish peers, they chose a number of representatives to sit in the British House of Lords. The Acts of Union 1800 changed this to peers of the United Kingdom, but provided that Irish peerages could still be created; but the Irish peers were concerned that their honours would be diluted as cheap prizes, and insisted that an Irish peerage could be created only when three Irish peerages had gone extinct (until there were only 100 Irish peers left). In the early 19th century, Irish creations were as frequent as this allowed; but only three have been created since 1863, and none since 1898. As of 2011, only 66 "only-Irish" peers remain.