I pulled this off a the RPGnet forum about this same question.
<SNIP>
Arneson v. Gygax
Author: XXXXXXXXXXXXXXXXX
Date: 12-11-2001 09:52
There has been a lot of controversy over time as to who was the true "creative genius" behind D&D (original model, pre-AD&D).
As far as I understand Our Collective History, it goes like this.
Back in the days before D&D there was a little gaming group that creating a game called Chainmail. Compared to other more popular minatures wargaming rules, Chainmail was pretty lightweight. There was a lot of mixing of historical eras, a lot of assumptions about abilities of troops that just were not accurate, and some rather oddly complicated rules that would show up in strange junctures. I should know -- I used to play
Anyway, this group decided it might be fun to make man-on-man rules for Chainmail. They had already devised jousting rules that were simple, fun, and allowed for a bit of characterization. So the man-on-man battle rules came into being in the back of the book. Then the bright idea was hit on -- let's add critters from Tolkein! Yes, we can refight the Lord of the Rings!
It was cool

Accurate? No. But it was WAY cool.
Arneson & Gygax were both taken with their company's game. But Dave wanted something MORE. So he started creating a riff off the man-to-man rules where you could start with "just a guy" and make him into a hero. With a lot of work this evolved into the earliest forms of D&D.
The problem was that Dave came up with some great ideas, but it was just a heap of scattered notes. Gary got involved -- he helped organize the rules into something more coherent. (For any of you who have read those first three books, just cast your mind back to what the pre-D&D must have looked like if this was the edit job...).
In other words, both guys worked on the idea, but in very different ways. The problems cropped up later because Gary was more outgoing and opinionated -- he tended to dominate the early talk about the game, so with time people came to look upon it as "Gary's game". Equally, he was great at setting up the early scenarios based on Dave's ideas. Conversely, Dave was considered the better DM, but outside of his games he tended to be more withdrawn and made less of a splash at the early gatherings.
Gary was glad to take more and more of the credit, especially one "The Dragon" took off. Dave grew resentful and hurt; he felt like he was being edged out of what was essentially "his" game.
So, two different minds, two different approaches, two different egos of radically divergent natures. After the initial push, Dave Arneson tried to come up with new systems (I had a chance to look at a prototype of a game he was working on back in 1979 that involved using skills, including many NON-combat (!) skills and minimalizing the use of levels, but it was about then that RuneQuest started moving and so he never finished the product), but none of them ever flew. Gary Gygax became Head Honcho of TSR until he was unceremoniously dumped several years later. Now we have his resurrection.
Film at 11?
RE: Arneson v. Gygax --WOW
Author: XXXXXXXXXXXXXXXXXXXXXXX
Date: 12-11-2001 13:58
Geez, XXXXXXXXXXXX, who art thou? You've got that story amazingly accurate, and 'I wuz there'.
RE: Arneson v. Gygax --WOW
Author: XXXXXXXXXXXXXXXXXXX
Date: 12-11-2001 17:07
Well, XXXXXXXXXXXXXX, would you believe I had an accidental interview with Arneson at a game convention back in about '79 or '80?
e-mail me & I'll give you particulars of my life
(XXXXXXXXXXX -- gleefully celebrating his Silver Anniversary as a gamer in 2001)