A sub-machine gun
is defined as a handheld or shoulder arm that fires pistol ammunition
in a fully automatic mode. It is distinguished from the larger assault rifle
by its limitation to pistol ammunition, which while not necessarily (or even usually) having a smaller bullet caliber
does, typically, have a much smaller propellant
charge. A sub-machine gun is usually much smaller than an assault rifle, as well, although some extreme variants of each type overlap in size.
The development of the sub-machine gun came about in the early part of the twentieth century in response to a fairly specific set of tactical problems. Once it had been introduced, however, the sub-machine gun (SMG hereafter) was quickly adopted for a variety of roles - not, usually, those for which it had been originally designed. This writeup will offer a quick history of this type of firearm, with some of the more well-known makes as examples.
At the beginning of the twentieth century, the only widely-used automatic weapons were emplaced, heavy machine guns. Some work was being done on smaller, more portable automatic weapons, but even these were mostly designed to be used in a fixed position; they were merely small enough to be lugged around between uses by a one- or two-man unit. During the First World War, some of the first uses of shoulder autoweapons occurred. The U.S. Army had the Browning Automatic Rifle - a complex, gas-operated design in full rifle form factor which could, nevertheless, fire off its fifteen or so rifle rounds in short order. As Ashley Pomeroy notes, near the end of that war the Germans introduced the Bergman MP18, a small automatic weapon which, despite also having a 'rifle-like' form factor, used 9mm pistol ammunition. As such, it may qualify as the first SMG to be mass-produced. It was introduced too late to make much of a difference in tactics, however, and was utilized mostly as a makeshift defensive tool - a 'more portable' machine-gun nest.
After the war, General John. T. Thompson of the U.S. Army Ordnance Department (Retired) began working on several designs for automatic shoulder arms to replace the too-large and too-complex BAR. One of his 'side projects' would turn out to be the cultural father of the modern SMG and the gun that would introduce the concept to the world, and would bear his name - the Tommy Gun. He designed it with a specific purpose in mind, as evidenced by the nickname he gave it: the 'trench broom'. Drawing on the experiences of World War I, he believed that the modern soldier needed to be able to carry as much firepower as possible so as to be able to exploit any breakthrough - should he be able to break into an enemy fortification, he should be able to 'clear' it single-handedly if necessary. Furthermore, his weapon should be as durable and simple to use and maintain as the Enfield rifle that was then in widespread use.
The Tommy Gun fit these parameters. More on that weapon in its own node, of course; however, suffice it to say that this was the first American true SMG. It fired pistol ammunition (the .45 ACP pistol round) from a two-handed grip - there was no stock on the original Thompson, rather, it had two pistol grips and was designed for hip shooting. It was smaller than a rifle, with a 10.5 inch barrel. It was capable of fully automatic fire - early prototypes were able to fire at over 1500 rounds per minute, although this was later reduced for better reliability and control to around 875.
Despite its stated purpose, the Tommy Gun was received coolly by the U.S. military. No orders were forthcoming. It did, however, find another arena - one for which it was uniquely suited. The 1920s was the era of Prohibition, and the time of the Gangster and the G-man - anxious to secure any advantage possible over the more numerous and usually better armed criminals, the FBI and local police began ordering the Tommy Gun to deal with crooks in automobiles. While .38 revolvers (the standard police sidearm) and shotguns (the standard 'heavy' police riot weapon) had difficulty penetrating the metal of cars which gangsters were now favoring, the flood of .45 bullets from the Thompson did not - and the high rate of fire increased the chances of stopping a car.
Of course, it wasn't long before the crooks had them too. The initial price of $200 per weapon soared to over $2000 on the black market - and those were 1920 dollars. The gun burst onto the American consciousness with the brutality of the Valentine's Day Massacre - the speed and efficiency with which it killed were driven home. Suddenly the military wanted some. The U.S. Coast Guard ordered some, as did the Navy - the small size and high firepower were ideal for boarding actions. The Army grudgingly ordered a few, but even by the time World War Two broke out, less than 10,000 of the guns were in military hands. They would be in high demand, not only for their firepower and durability but because of their commonality of ammunition with the Browning M1911 officer's pistol, which meant ready availability of ammo.
The War brought on a great burst of ingenuity in the field of hand held weapons. One of the most famous to come out of that war was another SMG - the British 'Sten gun', a weapon designed to be built out of readily available parts by cottage industry that for all its considerable faults nevertheless was a nastily effective weapon for the 2002 equivalent of 9 pounds sterling in parts. It is rivalled by what some have termed the first assault rifle, the German Schmeisser MP40. Both were used in what would become the SMG's increasingly important role of special forces weapon. Two factors would drive the SMG off the battlefield of the infantry and into the back alley of the spec-op and law enforcement: one, the weapons were expensive compared to basic rifles, and two, they were not as powerful as rifles or assault rifles. The latter became of critical importance as body armor began to proliferate, and even before then, as decent optics and more widely-available machine guns meant that engagement distances began to open up. The SMG simply couldn't engage a target at anything near the range of a normal rifle, meaning that during trench warfare, or sniper duels, or even in normal open country maneuver warfare, it wasn't nearly as useful as even a semi-auto or bolt-action rifle. Only in city fighting or clearing fortifications was the SMG a better choice, and in those situations, soldiers still managed to get hold of them - their army's, the enemy's, whichever they could get their hands on.
For special ops forces, however, they were perfect. They were lighter and smaller than assault rifles, and at the ranges that special ops were supposed to engage - i.e., short - they were just as if not more deadly. Law enforcement favored them for similar reasons, along with a preference for lower-power bullets to minimize civilian casualties, as well as the ability to utilize a smaller SMG as a very high capacity pistol.
The Sten begat a whole slew of 'cheap and light' SMGs that would inundate the world's arms markets for the next fifty years, as Ashley Pomeroy's excellent writeup tells us. Some of those guns are notable for our purposes - the American M3 'Grease Gun' replaced the large and heavy Tommy Gun in American military service. The Israeli arms industry copied a Czech design based on the Sten to produce the Uzi - one of the 1980s most recognizable weapons. More 'upscale' forces went with the high-ticket Heckler & Koch MP5, a family of 9mm SMGs that drew more inspiration from the MP40.
By the end of the twentieth century, SMGs had spread out into an entire spectrum of weapons. At one end were those whose primary virtue seemed to be their low cost to acquire and operate, such as the (infamous) American Arms Corp. 180, a machine pistol which fires low-cost .22 long rifle ammunition (from a 177-shot magazine, yet) at over 1800 rounds per minute. In the middle were the more 'conventional' weapons, albeit of higher quality - the H&K MP6 and other MP5 follow-ons as well as iterations of the MP5; the Ingram MAC-10 and Galil's UZI, of higher power and slightly better build quality; the Heckler & Koch UMP, a modern multi-caliber SMG, and others. At the far end of the spectrum sat more 'exotic' weapons such as the the Heckler & Koch MP7-PDW and the FN P90 - what are now termed 'personal defense weapons.' These are pistol-sized arms which fire fully automatic, usually high-velocity small-caliber rounds, which may be designed to penetrate armor or vehicles. The MP7 fires a 4.6mm bullet, while the P90 fires a 5.7mm round it shares with the FN Five-seveN pistol. While calling these SMGs is a bit of a stretch, they do clearly fit the characteristics laid out at the beginning: small size, capable of fully automatic fire, utilizing pistol-size and charge ammunition.
At present, these latter weapons are mostly still expensive enough and/or rare enough to be found only in prototype form or in the hands of militaries. As history shows, however, ramping up production enough to supply a hungry military usually makes weapons affordable enough for civilians - so they will probably show up on the arms market soon enough. One of the attractions of the new PDW-type SMGs is that they have low enough recoil, due to their smaller cartridges, that they can be fired single-handed like a pistol, even in automatic mode; they are designed to do damage through multiple hits, and to put out enough rounds to ensure those hits, even for a minimally-trained and less-experienced shooter. They are intended for use as an emergency measure by 'rear area' military personnel - downed pilots, staff, drivers, etc. etc.
Whatever the future holds for hand weapons, we can be certain it will involve variety.