ISO Latin 1 is a 8-bit extension of the 7-bit ASCII character repertoire. Since some of the 256 (respectively 128) code positions that are representable using 8 (respectively 7) bits are reserved for control characters, ISO Latin 1 contains 191 printable characters, 95 of which are ASCII characters.
ISO Latin 1 was designed mainly for use with languages of western Europe. These languages use Latin alphabets with some extensions. More exactly, ISO Latin 1 was designed with the following languages in mind: Danish, Dutch, English, Faeroese, Finnish, French, German, Icelandic, Irish, Italian, Norwegian, Portuguese, Spanish and Swedish. However, for Finnish and French it is not quite sufficient; see my notes on ISO Latin 9. See also Coverage of European languages by ISO Latin alphabets.
Many other languages, for example Indonesian and Swahili, can be written with the ISO Latin 1 character repertoire.
After the addition of letters for those languages, there were still many code positions available. A set of special characters, such as the copyright symbol (©) and pound sterling symbol (£), were added. No "free positions" were left for eventual special use. There is no obvious logic in the repertoire of characters added, but assumably the idea was to select characters which are often needed in texts written in the above-mentioned languages.
The ISO 8859-1 standard was originally approved in 1987. As of this writing, the newest version of the ISO 8859-1 standard is ISO/IEC 8859-1:1998, dated 1998-04-16. Disclaimer: I have not yet been able to compare the versions in detail. My document is based on the 1987 version. However, according to a Usenet posting by Markus Kuhn, the main change is that the names have been made identical to those in UCS (i.e., in ISO 10646 and Unicode).
As early as in 1982, ECMA (originally established as European Computer Manufacturers' Association) begun work on a standard with aims similar to those that lead to the ISO 8859 standardization, and in March 1985, ECMA published Standard ECMA-94 8-Bit Single Byte Coded Graphic Character Sets - Latin Alphabets No. 1 to No. 4. It is largely compatible with parts 1 through 4 of ISO 8859. The 2nd edition of ECMA-94 (June 1986) is available on the Web in PDF and PostScript formats.