The Joker is Batman's arch-nemesis and his origin is shrouded in mystery. His skin and joker smile are commonly attributed to accidentally falling into a chemical bath while he was under the persona of Red Hood.
Creation
Originally created to be an evil court jester, the Joker was originally rejected as a villain for being too clownish. Jerry Robinson is the original creator of the Joker, he talks openly about this and did do the original concept sketch of the clown faced villain. His trademark Joker Card (Jerry Robinson also drew) has been featured in many Batman movies, comics and animations. The original drawing of the card has also been featured on display in many museums across America. Jerry was also the creative consultant for The Dark Knight movie which closely followed Jerry's stylings of the villain. Bob Kane unfortunately finagled many legalities early on about Batman and fellow characters which made him look like the sole creator. The creation has been argued but Bill Finger may also share credit (as reported by Bob Kane). He was modeled after Conrad Veidt after his performance as Gwynplaine in the Man Who Laughs. Originally, he was a mass murderer in his first dozen or so appearances. He was set to die in his second appearance, however, the editor (Mr. Whitney Ellsworth-who was the editor on many DC Flagship titles) at the time saw the potential of the character and opted for his survival. So one more hastily drawn panel was added to the very end of the page by Bob Kane that showed the Joker had survived. Were it not for Whitney The Joker would not be here today.
Character Evolution
For his first appearance in Batman #1, the Joker was presented with no origin story, simply existing. Detective Comics #168 revealed that, before his transformation, the Joker was the criminal known as the Red Hood, later falling into a vat of chemicals, making him the Joker that everyone has known him to be.
Much of the Bronze Age and Iron Age Joker's depictions derive far less from the goofy Silver Age Joker than they do from Frank Gorshin's eerie depiction of The Riddler in the 1960s television series. Both the Bronze Age and Iron Age Joker and Gorshin's Riddler are obsessed with matching wits with The Batman, love to lecture other people about their personal life philosophy, and will shift from eerily calm to manic at a moment's notice -- none of these were signature traits in the Silver Age Joker. Heath Ledger once stated that his depiction of the Joker in the Dark Knight film was inspired to a large extent by Frank Gorshin's Riddler.
Although there have been various efforts to create a single, established origin story, there has yet to be an official origin for the Joker. The most popular story, however, is in The Killing Joke, where he is referenced to have been an engineer at a chemical plant before quitting his job to pursue a career in stand-up comedy. His career change did not prove to be the correct choice, as he failed miserably. In desperate need to support his pregnant wife, Jeanine, he turned to a couple of criminals who planned to break into his previous place of work. The Red Hood persona is given to him, signifying him as the inside man of the operation and also seemingly making him the leader, who would take the fall in the event of the operation going wrong. In the middle of planning, the police call him, informing him that his wife and unborn child have died. Stricken with grief, he attempts to back out, but his hand is forced to continue the operation. When they arrive at the plant, however, security, had been increased unbeknown to him, are waiting for them; and, as the Red Hood runs away, the two other criminals were shot dead. Upon seeing the Batman, the Red Hood jumped over a rail, into a vat of chemicals. He washed up in a nearby waterway, where, upon the removal of his Red Hood, he saw his skin had turned chalk white, his hair green, and his lips ruby red. With this added to the previous misfortunes of his day, he had a psychotic breakdown, and as such the Joker was born. However it is suggested in The Killing Joke, by the Joker himself, that sometimes he remembers his past one way, sometimes another. This leaves the origins of the Joker, as ever, open to speculation.
In Batman: Gotham Knights 50-55 this version is supported as there was a witness, Edward Nigma, the Riddler, to the murder of the Joker's wife, who claimed that the criminals used this to force the engineer, in this version named Jack, into following through with the crime.
The latest, and by far longest origin story is "Batman: Lovers & Madmen" followed by "Batman: Dead to Rights," a compilation of several issues from the Batman Confidential series. This time around, the story is told from Batman's point of view and not the Joker's. There is nothing about him ever having a wife, a normal crime-free life, or ever having been the Red Hood. However this origin story does not contradict the heavy personality changes the Joker has been essentially revamped with.
Here Jack (no last name) is a perfectly sane but immoral gun-for-hire & bank robber with a few mental, emotional, & personality disorders, bored with the lack of challenge & excitement in his life, until Batman walks into it. He becomes obsessed with Batman and goes to violent extremes to get his attention, acting like a creepy romantic stalker.
In Dead to Rights, we learn how the Joker came to be in Arkham when found to be immoral & far too competent to be ruled as insane by a court of law; not too far off from " Joker: Devil's Advocate." It has yet to be seen whether the Batman Confidential series will retell Joker's crippling of Barbara Gordon.