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What
Folk music branches from oral tradition in communities were there was no mass communication--no cell phones, no instant messenger, etc. There were just people sitting around and singing their stories.
Who & When
Around the '30s or '40s, popular musicians like Woody Guthrie started singing songs their parents sang to them and composing their own variations of traditional folk music. People like Pete Seeger and The Kingston Trio followed suit and popularized songs passed down generation through generation.
In the '60s, musicians like Bob Dylan and Joan Baez took folk music ideas and turned them into protest music.
Etc...
If you saw "A Mighty Wind," you saw a loving parody of folk music and its performers. Bruce Springsteen offers up his own brand of rock/folk music.