In the late sixties, Matchbox cars already existed, and they were selling like crazy. Elliot Handler, co-founder of Mattel, saw that realistic toy cars were making a mint for Matchbox, and he wanted a piece of that market. So he hired actual automotive designers and set about creating the first set of 16 Hot Wheels cars, which were also known as California Custom Miniatures. The very first car produced was a dark-blue (or white, depending on your source) Custom Camaro, and the first set included a preview of the 1969 Corvette before the car was even available in full size. Rumor has it that this was thanks to former Chevrolet employee Harry Bentley Bradley, who knew that the door to the GM cafeteria was often unlocked. He used his inside knowledge to get ahold of the new Corvette plans and create a teeny-tiny version. (He also designed 10 other Hot Wheels in the 1968 collection.)
Hot Wheels are built at a 1:64 scale, which means if you hit a regular car with a shrink-ray and made it 64 times smaller, you'd have a Hot Wheels car. For the first few years, Hot Wheels were painted in Spectraflame, which was about as shiny and sparkly as paint could be, and they had chrome-like mag wheels, too. And, just like the coolest real-life muscle cars, Hot Wheels had redline tires, a feature they carried up until 1977.
Even in the very first year, there was a track available for racing Hot Wheels, and the cars were made to reach 200 scale miles per hour (321.9 scale kilometers per hour). They had moving styrene wheels attached to the chassis by actual axles with a working suspension that included tiny plastic bushings. This suspension was a real pain in the bumper to install, though, so in 1970 it got an overhaul.