Before there was an American film industry, back when Hollywood was just a little village, there was this. The pre-Hollywood era of American cinema.
In 1878, an Englishman named Eadweard Muybridge decided to answer a question posed by former California Governor and noted horse-racing enthusiast Leland Stanford — when a horse gallops, is there any point in its gait at which all four of its hooves leave the ground? To do so, he took a series of still photographs of a horse galloping in fast motion and strung them together. The ensuing three-second film, known as Sallie Gardner at a Gallop or The Horse in Motion, was the first instance of a motion picture in history. (And for those wondering, the answer to Stanford's question was "yes"; at the moment when all four legs are gathered under its body) Later, Muybridge encountered a device invented by an Austrian artillery officer named Franz Eucatius (sp?), who had improved on the 200-year-old magic lantern by putting the images on a rotating disc, allowing him to produce slideshows on gun targeting for his students; these were spread around the world by the great Austrian magician, Ludwig Döbler. Muybridge realized that if you cranked the disk with the images in fast succession, the images seemed to move: he called this his "zoopraxiscope", but we would recognize it as the first movie projector. As a result, Eadweard Muybridge is usually credited as being the inventor of the motion picture. (And one last thing on Muybridge: his "style" of film-making, which involved taking a series of photos with different cameras in rapid succession, would later serve as inspiration for the development of Bullet Time. That's right — a 19th century inventor was responsible for The Matrix.)
The main pioneers of the early commercial motion picture industry were Thomas Edison and William Kennedy Dickson, the inventors of the Kinetoscope. This early film exhibition device created the standard for all cinematic presentation before the advent of video — running a strip of perforated film bearing sequenced images over a light source with a high-speed shutter to create the illusion of movement. Developed simultaneously was the Kinetograph, the first film camera, which set the standard of 35 mm film as the basic film gauge. Note that sound recording and synchronization are not part of this package of inventions — the technology to put synchronized sound into motion pictures was still decades away, meaning that all films from this era were silent. Even incidental musical accompaniment was more the exception than the rule during this period.
Edison ran the first public exhibition of the Kinetoscope in 1894 in New York City, and the novelty of the device made it an immediate success, earning Edison more than $85,000. The invention of projection technology to go with the Kinetoscope (before, movies could only be viewed through a screen inside the device) helped to ensure its profitability. New York and New Jersey soon became the center of the burgeoning motion picture industry, with Edison using his profits to establish Edison Studios in West Orange, New Jersey. Notable films produced by Edison Studios include the 1896 film The Kiss (notable for causing the first moral panic over indecency in film), the 1903 film The Great Train Robbery (a pioneering Western that introduced countless filmmaking techniques), and the original 1910 Frankenstein film (the first horror movie in history).
Unfortunately, Edison also used his patents to try and monopolize the film industry. In 1908, he and several other early American and French studios created the Motion Picture Patents Company (MPPC) to shut out smaller filmmakers, using Edison's patents to seize the cameras of filmmakers who had not paid the patent fee. While the MPPC was dissolved in an antitrust ruling in 1915 (an act that, combined with the loss of European markets during World War I, forced Edison out of the film business), it had already caused countless filmmakers to pack up and head out west to shoot their movies, hoping to escape Edison's reach and that of his army of New York lawyers. Many of them headed to places like Chicago, Florida and Cuba, but one of the most popular destinations was the little town of Hollywood, California (then some distance from Los Angeles proper, but already connected by streetcar), a place where there was a relatively wide variety of terrain in the near area (deserts, beaches, hills, farmland), a place where it was usually sunny which was conducive to filming outdoors, and most importantly, a place that was 3000 miles away from Thomas Edison.
The Pre-Hollywood Era is generally held to have lasted from 1878, the year of Eadweard Muybridge's experiments, to 1911, when the first film studio was opened in Hollywood.