Fleeing Refugees
Interestingly there are no historical records about the origins of Venice and historians could only surmise that the city was founded by refugees fleeing the rampaging Attila and the Huns around AD 422. Prior to this, the area was mostly inhabited by fishermen and hunters.
Many of the refugees were from (what is now) France and Northern Italy who had to leave their burning towns and villages which had been set alight by the barbaric Huns (on 
horseback). During the mass exodus, people fled to the many islands in the lagoon of Venice in the hope they wouldn’t be followed by the invaders. As luck would have it they remained relatively safe (though a tad damp).
The refugees found their new swampy abode a challenge, but they eventually built small cottages on rafts and before long they began to build cottages on posts, which had been driven into the mud and sand. Many of the houses were perched just above the sea, looking a little like seabird nests.
The Beginning of the Venetian Republic
After the coast was clear of Attila and the Huns, many returned to the mainland but others chose to stay in their watery sanctuary. In 452 Venice was officially founded. Boatbuilding became a popular pastime and salt became their main source of income. During the 6th century, the islands formed a type of council, with representatives from each island meeting with a central authority, even though they were still subject to the Byzantine rulers of the city of Ravenna.
More Marauding Invaders
All was going well until another marauding group of invaders, the Lombards, struck the mainland around 573. Led by King Alboin, the army (on horseback once again) wreaked havoc throughout Italy, claiming great portions of land. Again refugees fled to the safety of the Venetian islands. When peace eventually returned, Venice was on its way to becoming a great economic power, through its maritime and salt industries. More elaborate buildings began being erected on the islands (and the wooden foundations).
European Supremacy
Over the years the Byzantine control grew less and less until in the city became a republic and elected the first ruler, known as the doge in 697. A few skirmishes with the Saracens in 836 and the Hungarians in 900 were quickly resolved. In 991, Venice signed a commercial treaty with its Muslim rivals ensuring a strong trading partner in the East. By the 10th century, it was clear Venice was going to be a great commercial city, as it was strategically placed at the head of the Adriatic Sea, making it the perfect trading port and almost invulnerable to naval attacks.
During the 13th and 14th centuries, Venice became involved in a series of wars with the rival port city of Genoa for naval supremacy. The wars eventually ended in 1380 following Genoa’s defeat during the epic siege at Chioggia. Venice’s supremacy enabled it to acquire neighbouring territories which by the late 15th Century made Venice the leading maritime power in the Christian world.
Maritime Decline
All came to an end in the middle of the 15th century when successful Turkish invasions of Constantinople in 1453 and Morea in 1499 led to their control of the Adriatic and the decline of Venice’s maritime supremacy. Added to this was the discovery, by the Portuguese navigator, Vasco da Gama in 1497-1498, of a new sea route to the Indies via the Cape of Good Hope. Venice dominance was quickly ebbing. It just kept getting worse, In 1608 the Roman Empire, the Pope, France, and Spain ganged up on the ailing Venice in the League of Cambrai.
Republic No More
In 1797 the Venetian republic was conquered by Napolean Bonaparte, who then, during the signing of the Campo Formio Treaty, turned over Venice to Austria. The Venetian Republic was no more. In 1805 it was under French control but was regained by Austria in 1814. Venice and Lombardy were combined to form the Lombardo-Venetia Kingdom much to the angst of the Venetians, who in 1848 revolted against Austrian rule under the Italian leadership of statesman Daniele Manin. For a fleeting moment, Venice regained its freedom, however, victory was short and sweet with Austria regaining control the following year. In 1866 following the Seven Weeks War, Venice became part of the newly established Kingdom of Italy. Venice managed to avoid serious bomb damage during both World War I and II.
Today the city is one of Italians most loved, with over 23 million tourists visiting the city each year.