The smiley face fad, but not the smiley face itself, was the work of Bernard and Murray Spain, two brothers in Philadelphia. In September of 1970, they thought of the smiley faces that had been around for years in the advertising business and so decided to use the smiley for a peace symbol with general appeal. Bernard drew a smiley face, Murray added the caption “Have a happy day,” and soon they were producing buttons, posters, greeting cards, shirts, bumper stickers, earrings, bracelets, and key chains (among other things) by the thousands. The craze lasted about a year and half; the number of smiley buttons produced by 1972 was projected at 50 million.
But who created the original smiley face? Research has uncovered that the smiley that inspired the Spain brothers was created in December 1963 for the State Mutual insurance company by Harvey Ball, a graphic artist in Worcester, Massachusetts. State Mutual wanted a smile button for a morale boosting campaign. Harvey drew the smile, added two eyes, and then made it yellow to give it a sunshiny look. The buttons were a big hit and State Mutual began handing them out by the thousands. Mr. Ball’s total take: his $45 art fee.
(Source: The Straight Dope)