Well, it mostly revolved around people being willing to buy something that would give out eventually. The biggest issue is with the battery. You either have a rechargeable battery or replaceable ones. In both cases, the market in the decades past was more skeptical of such things unless they were purely kids toys or replaceable to begin with. An expensive rig wouldn't inherently have something that was supposed to be replaced frequently (TV remotes may be the exception, but they were generally used so infrequently it wasn't really the same thing). Today's market is different, everything it seems has been made disposable. However, rechargeable batteries have also become more efficient with the latest technology, so that's why they've caught on better.
As for how they work, all mainstream "wireless" technology that I know of is based off of electromagnetic waves. TV remotes generally use a directed burst, and commonly have an infrared diode at the front. Think of it like shooting a light out of the remote, that you can't see. The Wii-mote has something like this too, used more for positional placement. Others, like the PS3 controller, and non positional data from the Wii-mote , send out a more omindirectional signal, which allows the player to move it around not loose connection. This is more like a mini radio tower. Again it's electromagnetic waves, just a different way of creating them.
There are much more complex answers, and feel free to proof my answer any of you that know them, but I think this applies best to this audience ;)
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