The apostrophe did not appear as a mark of punctuation in English until the seventeenth century. Its function then was to signal that a letter had been omitted. For centuries, the English had used the suffix -es to show possession, e.g. a birdes nest, a knightes armour. Over time, the e was dropped -- thus, a birds nest, a knights armour -- and, as happens so often in English, the word order within the sentence indicated the meaning quite satisfactorily.

But seventeenth century English began, rather pedantically, to use the apostrophe to mark the ommission of the letter e, not only in the possessive case, but also in verb forms such as think'st or march'd when the e was no longer sounded. So, our two main uses of the apostrophe -- to show possession and contraction -- both had their origin in a need to mark omitted letters.