Nyar did this, but his write-up is VERY outdated now, and lacks some details in a few areas. So this is an attempt to start a new one.
In the fall of 1998, Andy Wolan SSRG was created and housed the popular Secrets of Sonic the Hedgehog (SoStH) site. At that time, SoStH was simply the most popular Sonic secrets site around. Around that same time, TomSonic posted the Pro Action Replay code used to access Hidden Palace Zone in Sonic 2. In addition, he took it a step further and figured out how to apply the code to savestates for KGen and Genecyst.
At my dad's business, I tried this stuff out on the office computer since I didn't have a computer at home at that time. I got curious and started changing bytes in the savestates and immediately found the act and life count bytes. I decided to take it one level up and randomly change stuff in the ROM. I wrote my findings on a sheet of printer paper and sent it to my buddy A.J. Freda by traditional mail. I then created the Sonic 2 Hacking Guide, a small little text file that contained my findings. Once I got my own computer for Christmas that year, I transferred my files over to that and sent them to Simon Wai. He posted them on his site.
Andy Wolan had asked Simon Wai if he'd like to move his site over to SSRG. At the same time, he asked me if I'd also like to be hosted. I agreed, and in January of 1999, both me and Simon Wai joined SSRG. I converted the Sonic 2 Hacking Guide into a proper HTML website. Over the next several months, I dedicated much of my time finding and documenting a variety of things like object layout, level tile layout (in savestates only, at least at that time), and art. Eventually, a mysterious Sonic 1 "beta" came to light, only to find out that it was created by Cyan Helkaraxe who had been privately hacking the Sonic 1 ROM ever since the Sonic 2 beta ROM came to light.
I created a brand new level called Coastal Valley which was a hack of Emerald Hill with an entirely new design. I had to do it all by hand, so during this time, I wanted to see someone make a level editor that made use of my notes. Stealth sent me an e-mail saying he was interested in making this editor. A little while later, he sent me SonEd (with a lower-case "d") v0.001. It had nothing but object layout against a blue background. Objects were represented by rings. Later, v0.003 was sent to me which displayed part of Emerald Hill Zone. SonEd progressed with each version introducing new features.
In September of that year, I become the maintainer (along-side Andy Wolan) of SSRG and tried to bring as much traffic to the site as possible (though Andy was probably more successful in this regard.) We witnessed new sites join SSRG such as The Underground Zone, Area 51, Sonic Fan-Games HQ, and many others. With the success of the Sonic 2 Hacking Guide, I proceeded to create the Sonic 3K Hacking Guide and Sonic 1 Hacking Guide (which was later combined with Cyan's Sonic 1 hacking information to become the Sonic 1 Hacking Documents.)
It wasn't until the end of 1999 and early 2000 that the community really started to see a strong and growing interest in hacking. It mushroomed, and many hacks began to appear.
On January 1, 2001, the Sonic Hacking Community (SHaC) website was launched. The idea was to be a sister site to SSRG, but it grew into an all out site that in a few respects, actually indirectly competed with SSRG. I moved my Sonic hacking sites over to SHaC to try and grow the site and keep my work in one central location.
~~~~ (DETAILS! HELP! I forget some of what happened during 2000 and 2001!) ~~~~
2002 saw many impressive discoveries, primarily in the Sonic 2 beta ROM. Nemesis was new to the scene, and he had discovered some hidden/unused art, as well as used tile mappings. Esrael showed up with additional discoveries of the same kind, and he also made scrapped enemies functional again. I had created the RXL patching format, and with David Declerck's help, a patcher was created to apply RXL patches to ROM hacks. RXL patches, while they did have a short life, proved to be used quite frequently by various hackers in the community. I also pushed for machine code hacking, an area I felt would push hacking further than it had ever gone.
In January of 2003, SSRG closed. That however did not stop the community from progressing. In December, I released Sonic QX, the first ever music editor for a Sonic game. It was really the last major thing I did for the community. Sonic QX was a popular utility, but it would be nothing compared to the innovations in music modifications that were to come later.
~~~~ (Again, getting flaky on details) ~~~~
Nemesis released a disassembly of the Sonic 2 code in 2004, and this took hacking to a whole new level. Machine code was a thing of the past. Assembly modifications allowed for more flexibility and opened the door to more sophisticated hacks.
Okay, I am missing several years of history here. The last couple years I wasn't really around as often, so I don't remember a lot of what happened. Plus, this write-up makes it sounds like the world revolves around me. Surely many of you had contributions or witnessed other contributions I didn't put in here, so help me out please!