There are two types of federally-funded highways in the United States: U.S. Highways or U.S. Routes, and Interstates. Both were designed to run across the country, and both are funded in part by federal money. However, they differ in their construction, maintenance, regulation, and numbering (somewhat). The systems were created to both bring order to preexisting roads, highways, and auto trails, as well as to create new means of transportation. They are now the backbone of automobile travel in the U.S.
U.S. Numbered Highways, sometimes called U.S. Routes, U.S. Highways, or Federal Highways, were created in 1926, and are essentially the same as state, county, and local highways in everything but name. They are maintained by whichever state or local government the road runs through, and often coincide with state highways or local roads. The Federal Highway system was created in the 1920s in response to a number of factors. In 1918, Wisconsin had begun to number its state highways, and four years later the New England Interstate Routes were established on the east coast. The need for organized highways, along with the steps already being taken by certain states, prompted the Federal-Aid Highway Acts of 1916 and 1921. These bills stipulated that the government fund 50% of the costs of improving major roads (the second bill limited that to 7% of the total highways in each state), and also mandated that 3/7 of the federally-funded routes be "interstate in nature." These roads would be come the U.S. Numbered Highway system.
The actual numbering of the routes was done by an organization originally called the American Association of State Highway Officials (AASHO), which was formed in 1914. In its 1924 meeting, its members (mainly the state Secretaries of Transportation) voted to start working on a nationwide system of marked highways. The following year, a Joint Board on Interstate Highways (containing both state and federal representatives) was created, and the name "U.S. Highway" was chosen. During the planning process, the federal government wanted the routes to be mainly cross-country, while the states wanted the system to include most of their locally important roads. In the end, they decided on a grid system. Existing major roads that were included were given numbers ending in 0 or 1 (0 for east-west routes and 1 for north-south), with other numbers being given to lesser roads (even for east-west and odd for north-south). Though the government will often refer to the roadway by its number alone, local cities and states would sometimes stick with the U.S. Routes' previous names (something that is still in effect today).
The roadways are marked using a shield design based off of the official United States Shield. The shield itself is white with a black outline. The original design featured a small section on the top of the shield portioned off with a black horizontal line and featuring the name of the state one was currently in, while the bottom had the Route number with US written above it. Modern signage has dropped both the state name and the horizontal bar. Occasionally, "US" still appears above the route number, but typically U.S. Highways are now signed only with a black number on a white shield, itself resting on a black square blank.
After the creation of the original network of roadways, certain kinks were worked out. States that wanted fewer or more roads were usually appeased, and in certain cases, where two pre-existing major roads paralleled each other, the corresponding U.S. Route was split (for example U.S. Route 40 between Manhattan, KS and Limon, CO became US-40N and US-40S for the north and south branches respectively). Route 60 (running from Chicago to Los Angeles, CA raised quite an uproar, mainly because it ran diagonally. Kentucky, which lacked a "major" east-west route (instead being left with U.S. Route 62), managed to get Route 62 and part of Route 52 renumbered US-60, with 62 being given to the Chicago-LA route, but Missouri and Oklahoma (which the former US-60 ran through) objected, because they had already started making signs and maps. Both sides objected to a proposed compromise where the original US-60 would become US-60N and the former US-62 would be named US-60E, with the split occurring in Springfield, MO. The final solution was to rename US-60 Route 66, with the rationale being that "66" was a round number, even if it didn't end in a "0".
As time passed, the AASHO began removing split routes either by renumbering them as branches from the main section (branches were numbered sequentially, with the extra digit being added to the front of the number, such as Route 220 which splits from Route 20) or by designating one section or another as an alternate route. The exception to this was California, Mississippi, Nebraska, Oregon, and Tennessee, whose governments refused to recognize the changes, and as such, the split route system was kept in place.
The U.S. Highway system is still in place today, though many of the routes have been decommissioned, mainly due to the arrival of the Interstate Highway system, and the fact that interstates paralleled the old U.S. Routes. In certain cases, the U.S. routes were turned into state highways (as is the case with Route 99 in California), while others reverted back to their old auto trail names (such as a section of US-90 in Houston, which was renamed Old Spanish Trail, the highway's original name). Many people believe that the era of the U.S. Numbered Highway system came to end in 1985, when Route 66 was decommissioned.
Just as Federal-Aid Highway Acts paved the way for the U.S. Highway System in 1916 and 1921, the 1956 version of the bill set aside funding for the creation of an Interstate Highway System (or Dwight D. Eisenhower National System of Interstate and Defense Highways). The following year, the AASHTO (with the added T for Transportation Officials) began a process similar to the one undertaken for U.S. Routes. A grid of routes that traversed the country was drawn up, but instead of using existing roads, the interstates would all be new construction.
The system's layout is similar to that of U.S. Routes--even numbers for east-west roadways, odd for north-south, and typically the leading digit of a three-digit interstate referred to a branch from a main road. However, while the U.S. Routes were numbered from east to west, the interstates were numbered west to east. Originally, this was done in conjunction with a decision to not use duplicate numbers, but when it became clear that more interstates were needed than numbers were available, the opposite numbering patterns helped to differentiate between the two types of roadways.
Also, the actual operation of the roads is different. While U.S. Routes were mainly made from existing roadway (complete with intersections and designed for mixed-use), interstates were not supposed to have traffic controls such as stop lights, except at ramps or toll booths. The use of interstates is restricted to motor vehicles only--farm implements, bicycles, and pedestrians are prohibited. The Interstate Highway System was also designed to be utilized by the military in an emergency (hence the "Defense Highways" portion of the system's full name). Apart from troop movements, the highways could be used for evacuations (including the ability to contraflow, or reverse the direction, of one side of the interstate to make the highway one-way). Other design features include a minimum of four lanes (two in each direction) and access only via entrance and exit ramps (no intersecting streets).
Originally, the system was supposed to cost $35 billion US and take 12 years to complete. Instead, the total costs have been over $114 billion, and the system was officially dubbed completed in 1991, when the last stop light was removed from Interstate 90 in Wallace, ID. However, there are still sections of the original project that have yet to be completed, and other portions take major detours from the original layout.
As the system stands, the Interstate Highway System contains over 42700 miles (68700 km) of roadway. The roads are marked by signage similar to that of U.S. Routes, except instead of being black on white, the shield is red, white, and blue. The top portion of the shield is blue with "Interstate" written in white, while the bottom is blue with a white number. A white horizontal line separates the red and blue portions (like the black line on the original U.S. Route signs between the state name and the number). There are also federal guidelines for the signage used on the interstates (typically green signs for most exits, yellow for warnings, and brown or blue for certain attractions or parks), and most interstates have a designated numbering system. Exits and distance along the interstates are measured in miles, most often running west to east and south to north. Exits are usually numbered for the mile they occur on, with letter suffixes being used when there is more than one exit in a mile. Exceptions to this are states that number exits sequentially (regardless of mileage), California (which only recently began switching to numbered exits; its interstates were built before exit numbering and it was deemed too costly at the time to resign them), and I-19 in Arizona, which uses kilometers instead of miles. Interstate mileage also often restarts each when the highway reaches a state line due to the fact that states are responsible for the exits and highway signage.
Unlike the U.S. Highway System, the Interstate Highway System has more specific rules for numbering of branches. Typically, if the first digit of a three-digit highway is odd, it represents a spur: a stretch of highway that is connected to the main interstate at only one end. An example of this is I-190, which branches off from I-90 and heads to Chicago O'Hare International Airport. An even prefix is a stretch of highway that goes around something (usually a city center), such as I-294, which avoids downtown Chicago and instead runs through the city's western suburbs. The even prefix is also used for loop roads or beltways (which would technically be two bypasses forming a circle, bisected by the namesake interstate). Even when the loop hits other interstates, it is named only for one. An example of this is seen with Loop 610 in Houston. I-10 runs down the middle of the loop from east to west, while I-45 crosses the loop at its southeast corner and the north leg. It is only called 610 though (not X45), even though it hits both interstates. This holds true even when the loop extends outside the original state, such as Loop 275, which goes around Cincinnati, OH but also hits I-71 and I-74, and goes through Kentucky and Indiana as well as Ohio. However, I-94 bisects a loop around Minneapolis-St. Paul, and the two halves are numbered I-694 on the north and I-494 on the south. Other exceptions to the numbering rules include I-238 in Oakland, CA (there is no I-38; the numbering came from the fact that it replaced State Route 238 and no appropriate number was available), and all of I-78's spurs in New York City never actually hit I-78.
The Interstate Highway System also features defined rules for Business Spurs and Business Loops. These roads leave the original interstate, and often follow a town's normal roads. They do not use the three-digit numbering system for loops or spurs, but instead have their own special signage. The normal Interstate Highway sign was modified, with the red and blue sections replaced with green, the word "Business" instead of "Interstate", and the word "Loop" or "Spur" often appearing above the number.
One commonality that the Interstate system shares with the U.S. Highway system is the use of names in addition to numbers. Cities, counties, and states will sometimes name their interstates, and locals will almost always know the highways by their name as opposed to their number (which is confusing for tourists). In addition, because the naming is a local phenomenon, it is possible for two different interstates to have the same name, even in the same state. However, unlike the U.S. Routes, which share their names with the roads they coincide with, the interstates (which were specially built) were named after the fact. As a result, they will typically be named for persons of importance or their direction of travel, while U.S. Routes would be called by street names.
The interstate highway system is funded in part from user fees (such as tolls and state and federal gasoline taxes), and in part by the federal government. As a condition of receiving this federal funding, Congress has been able to force states to pass several laws, including the national Blood Alcohol Content limit of 0.08% and the national 55 mph speed limit (now defunct), as well as some things unrelated to highways, such as a legal drinking age of 21. States are also responsible for law enforcement on the Interstates, and as such the federal government mandates certain penalties for violating highway laws, and even puts quotas on the number of underage drinking convictions each state must have per year.
One byproduct of federal funding for highways is the creation of "interstates" in states or territories that are isolated. Alaska, Hawai'i, and Puerto Rico all have interstates which receive federal funding, even though those roads do not actually go between states. They are numbered with the state's initial or initials as a prefix (such as H-1 for Hawaii or PR-22 in Puerto Rico). In addition, Alaska and Puerto Rico's roads do not actually meet the construction standards for interstate highways, but are still considered as such for funding purposes, and Hawai'i's interstates violate the directional numbering system (H2 runs north-south, while H1 and H3 run east-west).
Other E2 writeups by neil, DerekL, billh, Pyrogenic, and SPUI in How the United States highway system works; Flip, kessenich, The Custodian, QXZ, and Uberfetus in Eisenhower Interstate System; SPUI in US Route; Flip, SPUI, Ed Halley, Azound, ximenez, alanc, and Engelbot in Interstate Numbering System; requiem and /dev/joe in interstate; Jizz in US Highways; and Jizz in US Highway 99.
Thanks also to Wiccanpiper for his advice.