I think the first time I saw it was in the AD&D Complete Handbook to Halflings (that's what I'm guessing that the title was, because it could have been Guidebook, etc. It was one from the series of brown books that came out). That's what I think, though. It could have been the Monstrous Manual or Complete Handbook to Thieves.
I never did like THAC0. But that's just me. I was only in AD&D for a year. The first adventure I played in, the DM told me what to write instead of telling me the meaning of each stat. Not to mention that another friend I played D&D with, he practically had every D&D book except for the Player's Handbook. We even got a copy of the character sheets package, but no Player's Handbook. I bought it finally, about a month before 3E came out. Perfect timing.
Anyways...
Sorry for rambling!
Cheers!