Yeasts are amazing, because in the course of human history they are most likely the first (albeit unwittingly) domesticated microorganism. Ancient brewers would grow reliant on their particular mash basket (because of the yeast build-ups present on the fibers) because a well-used basket would jumpstart a better fermentation than a new basket (that didn't have large populations of yeast cells present in the fibers) (Standage 2005:16). Thought they didn't fathom it, by re-using their mash baskets these ancient brewers were in the process of domesticating a microorganism.
Yeasts essentially eat sugar, and then expel alcohol and CO2 as waste products. For fermentable products such as fruits (wine) and honey (mead), they sugar is already there for the yeast to consume. For fermentable products such as rice (sake) and cereal grain (beer) the grain must undergo the process of saccrification first, which involves converting the starch to sugar so it may be consumed by the yeast. Saccrification needs three things to happen: temperature, water, and enzymes; sometimes this includes malting. Only after this process can the yeast start fermenting the product.
In hindsight, it makes sense that many ancient fermented beverages were composed of a mixture of many bases. They were usually fruit, honey and grain based (McGovern 2009:37). Grapes and honeys have yeast populations on/in them. When fruit, honey and grains are mixed, the yeast goes to work on the sugars in honey and fruit. This raises the temperature so the grains may saccrify, and then the yeast continue to ferment the sugar released from the grain starches. Without the fruit or honey additions, the grain may not have had enough wild yeast or the necessary temperature conditions to begin fermenting on its own.
Sometime during the 15th century a wild yeast species (Saccharomyces eubayanus) most likely came to Europe from modern-day Argentina, where it had evolved in a symbiotic relationship with beech trees in Patagonia. This species mated with a domesticated yeast species (Saccharomyces cerevisiae) and created a hybrid yeast species that can withstand low temperatures (Saccharomyces pastorianus). Somehow, the new species took up in Belgian breweries and began to ferment beer in conditions that were heretofore impossible.
Because the pastorianus could thrive at lower temperatures, it became possible to ferment beer in cold caves. The process in the cold is slower, and so the fermentation is less violent. Without the fierce bubbling the yeast cells tended to stay at the bottom of the tank, rather than ride the froth upward toward the top. Brewers noticed that there wasn't much action at the top of their wort, but that there was a bit of action happening at the bottom. The fermentation took considerably longer and so the beer sat in a cold cave for quite a while before it was ready. From a brewer's perspective, the product rested in the cave for quite a long time. They created a terminology for the new product: "lager," which means "to lay down." Furthermore, because the lagered beers seemed to work on the bottom of the vat they became vernacularly known as "bottom fermenting" beers, while all other beers began to be known as "top fermenting." This terminology abounds today. Essentially, once it became clear that a new kind of beer was being produced in Bavaria, brewers saw it fit to distinguish it from other products. "Bottom" fermenting brews would be called "lagers." "Top" fermenting brews would be called "ales."
This is where the confusion set in. "Lager" referenced two distinct and not necessarily tandem things: (1) beer fermented with the new yeast species (unknown at the time) and (2) to rest a beer in the cold.
Beer making went on for thousands of years without human detection/comprehension of yeast until things began to change in 1860 when Anton van Leeuwenhoek first observed yeast under the microscope (but he did not hypothesize that they were alive). Yeasts have been sold commercially for bread making since as early as 1780 (Klieger 2004:13), but it wasn't until Louis Pasteaur published "Mémoire sur la fermentation alcoolique in 1857 that yeast's role in the alcoholic fermentation was publicly defined.
Because "lager" terminology was coined before yeasts were fully understood, the beer making world finds itself in a bit of a quandry. Some brewers use the word "lager" to mean beer made with the yeast species. Others use "lager" to mean beer that has been cold-rested. Others use the word lager only when the beer has been made with the yeast species and when it has been cold-rested. The term's confusion was further exacerbated when large breweries engaged in making ultra-inexpensive product by using a large percentage of rice in the mash, cold stabilizing the brew, and calling their drastically different product "lager." This bifurcated the already confusing moniker into even more perplexing territory. By the 1970s, "lagers" made with rice-predominant blends and cold stabilized for minimal amounts of time flooded the market and obscured the meaning of the "Belgian style lagers" made from predominantly barley or wheat that preceded them.
Klieger, P. Christiaan. (2004) The Fleischmann Yeast Family. Arcadia Publishing: USA.
Libkind, Diego et al. John Doebley ed. (2011) "Microbe domestication and the identification of the wild genetic stock of lager-brewing yeast." Proceedings of the National Academy of Sciences of the United States of America. 22 August 2011.
McGovern, Patrick E. (2009) Uncorking the Past: The Quest for Wine, Beer, and Other Alcoholic Beverages. University of California Press: CA.
Standage, Tom. (2005) A History of the World in 6 Glasses. Walker: NY.