La Commedia dell'Arte which literally means "Artistic Comedy" was an improvised play staring a number of recurring characters. One of these masks was Pantaloon but the mask character did not originate in the Commedia but in Italy years before.
Pantaloon's best friend is The Doctor and his nemesis is pretty much the remainder of the cast.
His outfit consists mainly of a pair of long red hose (stockings), a lose black or dark cape, Turkish slippers or other stylish and soft slippers, and a red woolen hat. His mask is brown with a large hooked nose much like a traditional Mr Punch (who is also based on another character or mask), sometimes he is given round glasses. He has a grey mustache and a long white beard.
He was called Pantalone in the original Italian.
The Venetian merchant, rich, greedy and naïve that must deal with people that are constantly trying to take his gold from him, he would generally lose out to wit and would at times be pleasant out of trust he would feel for those that actually care for nothing but his money "...e Pantalone paga!" (...and Pantaloon has to pay!)
In the Commedia
He is always old, sometimes a rich miser, sometimes a poor man, sometimes a bachelor, sometimes a father of a family. If he is rich, he is a slave to his money. If he is married, his wife is usually young, often deceiving him. He loves to give advice. Often he is the recipient of blows from his servant. He is always duped by someone.
--David Claudon
It is also quite likely that the character stems, in part, from a favourite Venetian saint - San Pantaleone, even though the character is usually (as mentioned) shown as a silly old man with spectacles and wearing tight trousers and slippers (most unsaintly).
His ideal counterpoint would be Harlequin who is always without money.
Pantalone was created as a mask character in the Carnival of Venice which it is said originated from a notable victory of the "Repubblica della Serenissima", in the war against Ulrico, Patriarch of Aquileia, sometime around 1162.
To celebrate this victory, dances and reunions were held in San Marco Square.
Ulrico's troops had apparently attacked Venice while the "Serenissima" (official army) was busy fighting another war against the Ducati of Padova and Ferrara. However Ulrico did not fair well and after the rather embarrassing defeat, Ulrico had to pay the Venetian one bull and 12 pigs. From then on, a tradition was soon established of killing every year that same amount of animals in the San Marco square, and all the population participated in a grand feast with many dances and other festivities taking place.
It would not have taken long due mainly to the very colourful nature and character of Venice that all manor of entertainers, fortune tellers, acrobats, dancers and the like would have joined in too.
The carnival grew right up to the 17th century (when Bull chasing became popular) which was quite artistic and culturally rich time for Venice.
The Liston delle Maschere was the official start of the Carnival of Venice when everyone, by law, was allowed to wear a mask. The mask was also useful to cover-up one's identity, allowing infidelity and a mix of social classes as well as the freedom to comment on the world, the nature of things and so forth.
It was in this place that the character of Pantalone was born developing as a caricature of the rich but most likely as a comment on taxation ("...and Pantaloon has to pay!") the fact that this mask survived and grew strong enough to be exported to La Commedia dell'Arte indicates that it was a strong image striking a note with the masses and possibly (like all great characters of art and literature) striking a cord with the general unconscious.
Sources
1 - http://www.davidclaudon.com/arte/commedia3.html
2 - http://www.delpiano.com/carnival/html/pantalone.html
3 - http://www.commedia-dell-arte.com/
4 - http://en.wikipedia.org/wiki/Commedia_dell%27Arte
5 - http://www.answers.com/topic/commedia-dell-arte