The caffeine-loaded monstrosity that is Mountain Dew was conceived by one William H. Jones. In 1925, he worked for the National Fruit Flavor Company, but soon he became an investor and stockholder in Tip Corporation of America, started by Clay P. Church, a friend of his. As manager, Jones worked on a product to compete with the popular Grapette soft drink, but he wasn't very successful. Church filed for bankruptcy, but Jones continued testing new flavors. He asked for investments from friends, all of whom worked for Pepsi, and received the cash and a defunct trademark name - Mountain Dew.
Of course, none of these investors were expecting to get their money back - they were just helping a friend out. Originally, Mountain Dew was similar in taste to 7-Up (lemon-lime) - it was intended as a mixer for bar drinks (thus the name). Jones eventually sold the drink to Tip Corporation. He then began work on a new drink. Realizing that Pepsi had no lemon-lime flavored soda, Jones created the new Mountain Dew, for Tip Corporation (with no fear of competition from Pepsi).
Well, as his luck would have it, Pepsi introduced their own competing product, Teem. Jones's investors had to back out due to corporate policies. He set up a long-term payment plan to pay off his debts and got to work.
Jones finally came upon a formula with the lemon-lime flavor as a base, but with enough orange juice for it NOT to be a lemon-lime drink. This would allow Pepsi bottlers to manufacture the drink. Jones also reduced the carbonation and added more sugar and caffeine. Finally, Jones convinced two North Carolina bottlers, Herman and Charles Minges, to sell the product. They insisted it be sold under the old Mountain Dew name, primarily because they had a bunch of old unused Mountain Dew bottles lying around. Mountain Dew, as we know it today, was released in April of 1961.
Within three short years, Tip was supplying the concentrate to more than 40 bottlers. On September 3, 1964, Pepsi bought out Tip. Mountain Dew became Pepsi's second-most popular drink (and it still is today).
Note: The "news" that Mountain Dew results in a low sperm count is an urban legend. It isn't true, but if you want to try it out by drinking a 6-pack a day for a few years, let me know and I'll write down the results.
Note 2: Punk rockers MxPx did the Mountain Dew song seen in commercials. I know a lot of people were wondering who those guys were, so there you go.