On an average night in the late Greek Dark Ages, wealthy people would hire a professional story-teller for an evening of entertainment. This story-teller would sing the stories of the Trojan War and its Greek heroes. These songs were the Greek equivalent of a mini-series, for the stories were so long that they would take days to complete.

The ancient Greeks believed Homer to be the greatest of these story-tellers and the composer of ten epic poems about the Trojan War, of which only the Iliad and Odyssey have survived. By ancient tradition, he was blind, but this idea may have originated in the description of Demodocus, a poet in The Odyssey. Several cities in Greece claim to be Homer's birthplace.

The general belief that Homer was a native of Ionia (the central part of the western seaboard of Asia Minor) seems reasonable, for the poems themselves are in predominantly Ionic dialect. Although Smyrna and Chios early began competing for the honour (the poet Pindar, early in the 5th century BC, associated Homer with both), and other cities joined in, no authenticated local memory survived anywhere of someone who, oral poet or not, must have been remarkable in his time.

Some scholars believe that Homer lived during the era of the Trojan War (11th century BC). Others, quoting Herodotus, place him in the eighth/seventh century BC. His poems seem to date from this time, so far as linguists and archeologists can determine. Whether Homer even existed, let alone authored both epics, is also a matter for debate. Many classicists believe that the two surviving Homeric epics are probably the only Homeric epics and were in fact composed by several individuals. There is however no evidence for this, and most classicists accept the overall Greek idea of a single author. In the 9th or early 8th century BC an alphabetic writing system reached Greece. Some 200 to 300 years before that Mycenaean culture had collapsed and the writing that existed at that time had disappeared. During the interval, Greece seems to have been nonliterate and an oral epic tradition was formed. The earliest alphabetic inscriptions to have survived, a few of them containing brief scraps of hexameter verse like the verse in Homer's work, date from around 730 BC. It's possible that Homer created his work some time after 750 BC and used writing to help him. Since literacy is not normally associated with oral creativity, it's also possible that Homer was not literate but dictated the poem to an assistant who wrote it down. Another possibility is that the poems were preserved orally until the middle years of the 7th century when the first 'literature' appeared (in the form of the poetry of Archilochus). In any case, Homer behaved like a traditional oral poet in many important ways.

Much of what we know (or think we know) about Homer is a projection of the poems Iliad and Odyssey themselves.They give clues about Homer's tastes and view of the world, but also reveal specific details about his technique and the kind of poet he was. The Homeric tradition was an oral tradition, in which poetry was made and passed on by word of mouth without the intervention of writing. Homer's own word for a poet is aoidos, which means 'singer'. Two such poets are described in the Odyssey: Phemius, the court singer in the palace of Odysseus in Ithaca, and Demodocus, who lived in the town of the semi-mythical Phaeacians and sang both for the nobles in Alcinous' palace and for the assembled public at the games held for Odysseus.

That Homer was a poet from the oral tradition can be seen in the style of the poems. They are 'formulaic': they contain many stock ephitets and repeated verses or groups of verses, as well as many fixed phrases that are employed time and time again to express a similar idea in a similar part of the verse. This refined and complex system of formulations has not been the invention of a single poet but must have been gradually evolved in a long-standing tradition that needed it for functional reasons. The tradition depended on these fixed phrase units because its oral nature invloved memory, practice, and a kind of improvising.

Ordinary aoidoi in the heroic tradition like Phemius and Demodocus probably worked with relatively short poems that could be sung completely on a single occasion. This is what one would expect, and it is confirmed by the habits of singers and audiences at other periods and in other parts of the world. At an occasion for heroic song, likean aristocratic feast, a religious festival, or popular gatherings in tavern or marketplace, the available time and concentration span of the audience makes for a natural limitation on the length of a poem. As well as the singer's own physique and the scope of his repertoire. Such relatively short songs probably provided the backbone of the tradition inherited by Homer. What Homer himself seems to have done is to introduce the concept of a quite different style of poetry: a monumental poem that took several hours or even evenings to sing, and that could achieve new and more complex effects. Homer must have trained as an ordinary aoidos, who began by building up a repertoire of normal-length songs acquired from already established singers. The greatest heroic adventures of the past were probably already prominent in any repertoire, like the adventures of the Argonauts and the Achaean attack on Troy. Some aspects of the Trojan War might already have been expanded into unusually long songs, although they probably were still manageable on a single occasion. The Iliad consists of more than 16,000 verses, which would take four or five long evenings, and perhaps more, to perform. To perform such a monumental song is asking a lot of your audience and needs a singer with an exceptional capacity and reputation.

Sources: Encyclopaedia Britannica, http://www.wsu.edu:8080/%7edee/MINOA/HOMER.HTM.
Many thanks to wertperch who provided much of the useful stuff :)