The 1970s were a time of experimentation for many things, but perhaps most of all for fashion. They birthed a whole generation of genuinely odd fashion trends, particularly in menswear, which in previous generations had thitherto been dominated by bland suits and boring shirt/pants combinations. The leisure suit attempted to change that. The concept was that traditional suits were too stiff and serious, and that men wanted, nay, needed a suit for wearing while having fun. Thus, it had a more relaxed fit, and came in a wide variety of loud, raucous designs, all intended for getting your party on.
"This suit is for leisure, but many times I wear it to get down to business."
Fez on "That '70s Show"
The design that everyone loves to hate was first assembled (I hesitate to claim it was "invented") in 1970 by Jerry Rosengarten, a 25-year-old fashion designer in New York City. The first leisure suit he made for himself to wear was fully double-breasted, double-knit, and completely reversible, with each side making use of a different fabric pattern. It was made of polyester, and consisted of a pair of flared pants, a matching belt (typically a shade lighter than the pants), and a suit coat with an unsettling, sweeping cut, making it rounder than any coat had a right to be. Its hugely broad collar and lapels were sometimes outlined in felt, a shade darker than the coat's color. Later leisure suits often included a shirt, usually the same color as the jacket and pants, and frequently decorated with some sort of attention-grabbing embellishment made to its front, such as ruffles along the button strap. A necktie was not standard, though some wore bowties, and fewer wore regular ties. Popular colors and patterns included navy blue, brown/tan, periwinkle, mint green, apricot, and white, and could be overlaid with houndstooth, gingham, plaid, vertical stripes, or, believe it or not, polka dot. In 1979, when I was three years old, my parents dressed me up in a periwinkle leisure suit with a ruffle-front shirt, for a wedding or something. My father had a brown leisure suit for the same event. I've seen pictures of it, but fortunately I have no memory of such cruelty.
The leisure suit was initially a success, and was fleetingly popular for much of the early-to-mid 1970s. The ensemble was a particular favorite of Elvis Presley (his jumpsuits are clearly influenced by the leisure suit), which helped give rise to its popularity. After a number of years, sweatshops in Asia began churning out leisure suits, making them cheap and accessible to anyone tacky enough to wear one. Soon after, the market was saturated, and only unfashionable and/or sketchy men could be seen wearing them. While in its death throes as a fashion statement, it became known as the "sleazure suit," inspired by the majority of its wearers.
Despite the horror of 1970s fashion, I'm of the belief that the leisure suit and all its hideous fashion relatives had to be conceived of and popularized back then -- if they hadn't, we'd be wearing stuff like that today, because we'd have no concept of how ridiculous and tacky they looked. Today, leisure suits are relegated to sight gags in movies, punch lines, and elderly men with completely alien senses of fashion.
An enduring account of a working class leisure suit wearer can still be found today in the 1977 disco movie Saturday Night Fever, starring a pre-Grease/post-"Welcome Back Kotter" John Travolta, decked out in a blindingly white/black leisure suit (which was sold at auction for $145,000 to late film critic Gene Siskel, who often said Saturday Night Fever was his favorite film). That movie is probably the best example of leisure suit mechanics and social dynamics in the 1970s.
Sources:
http://www.flashnews.com/news/9sys4sp4.htm
http://desires.com/1.4/Style/Docs/leisure.html
http://us.imdb.com/title/tt0076666/