Removed text from article 
You're right the history section needs serious work.  I have removed it from the article because, I believe, it is a lot of conjecture.  It certainly doesn't jive with what I've read on the subject, and goes contrary to information found in referenced articles, for example country dance originating in frontier towns.  I would suggest that the country dance section of the folk dance article is read carefully.  

I would also suggest that careful citing of references in this history section will make it a lot better.  What happened to the role of the "dance master", and of "recorded music"?  These are both important aspects of the caller's history.

It's a little too hit-and-miss for my taste.   

History
The role of the dance caller or cuer came out of necessity, given the origins of folk dance in America, but also in various cultures throughout the world.

In America, you can find many examples throughout history of frontier towns (where country dance originated) having people with traditions and dance styles from all over the world.  It was customary for people, when they finished work for the day, or when the week was over, to relax and go to a community dance event.  Everyone from town came.

Having people, however, from all sorts of different cultures caused problems.  People from one culture would know a certain type of music, or certain steps; and while there was some overlap in a few cases, the different steps were very confusing to those who didn't know the dances.  Also confusing was the fact that even in the case of overlap between cultures, the steps had differing names.

Thus, the country dance caller was created out of necessity.  Rather than only the dances they knew from each caller, someone was called upon (or more often just came about in an effort to help everyone have a good time) who learned the dances and steps of everyone, and each town created their own list of dance steps.

As towns expanded, and people travelled, these new callers (named such because they called out what you were to do next in each dance) were able to learn from each other and each other's styles to the point where, modernly, there is a full Callerlab devoted to maintaining a list of proper square dance calls, integrating new calls and styles of dance, and generally supporting and promoting new ideas in square dance calling, as well as up-and-coming callers.