Just to add something to the "evolution": first, some tour operators started selling seat-only-bookings by offering so-called "camping flights": the flight you booked included a booking for one night at a camping site (or in some cases at a hostel or cheap hotel), so that you essentially only paid the flight - this was a way for them to comply with the "may only be sold in conjunction with land arrangements" rule for those flights.
These seat-only sales were only made through tour-operators, the airlines only started picking up on that a bit later - as Patrick states, it was in the mid to late 1990s, and I actually remember it as more late than mid 1990s - at least for most airlines: around 1997/1998 barely any seat-only bookings were possible, some started in the 1998/1999 timeframe, while most flights, at that time, were still only bookable through the "TOMA"-Mask in the Start/Amadeus GDS (the same mask travel agencies use to book inclusive tours): barely any airline had started sales through own reservations departments or websites then.
Then, I'd say around the year 2000, the first airlines started sales through their website, with Air Berlin being the most advanced of them: they practically sold seats on all of their flights, except the few in their own network that were full charters; Hapag Lloyd and Condor followed a while later, though I never felt them to be quite as aggressive as AB
about their seat-only-sales, which probably has to do with the fact that they're both tour-operator-owned. Aero Lloyd came in last out of this group, and at the time of their demise, this was one factor that was mentioned quite frequently.
By the way - as far as I know, only Hapag Lloyd at some point started offering lower fares through standard GDS access than through the TOMA-Mask and sometimes even their own website, because the website was - at that time - based on the same booking database that feeds the TOMA-Mask. You could, at that time (don't know, and doubt, if this is still the case), get a cheaper flight by looking at a normal Internet Booking Engine than by looking at HLF's own website - or if someone came into a travel agency with a printout from HLF's website, it was always possible to beat the price by simply not using TOMA, but by looking in Amadeus.