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Youthful inventor Joshua Lionel Cowen wasn't the first to manufacture toy trains. But his talents as an engineer and salesman soon put Lionel ahead of its competitors. Cowen designed his first train, the Electric Express, not as a toy, but as an eye-catching display for toy stores. During Lionel's early days, Americans were captivated by the railroads and awed by electricity, still a rarity in many homes. Lionel's first trains were powered by wet-cell (acid-filled!) batteries, soon replaced by the 110-volt electric transformer. By 1906, with the introduction of preassembled track and a selection of engines and cars, the Lionel we know today was already taking shape.
http://www.lionel.com/articles/timeline/
