From Wikipedia:
The size of a byte was at first
selected to be a multiple of existing
teletypewriter codes, particularly the
6-bit codes used by the U.S. Army
(Fieldata) and Navy. In 1963, to end
the use of incompatible teleprinter
codes by different branches of the
U.S. government, ASCII, a 7-bit code,
was adopted as a Federal Information
Processing Standard, making 6-bit
bytes commercially obsolete. In the
early 1960s, AT&T introduced digital
telephony first on long-distance trunk
lines. These used the 8-bit µ-law
encoding. This large investment
promised to reduce transmission costs
for 8-bit data. The use of 8-bit codes
for digital telephony also caused
8-bit data "octets" to be adopted as
the basic data unit of the early
Internet.
