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In 1932, in the village of Billund, Denmark, a master carpenter and joiner by the name of Ole Kirk Christiansen started a company to manufacture stepladders, ironing boards and wooden toys. Ole Kirk's son, Godtfred Kirk, joined him in the family business at the age of 12.

In 1934, the Christiansen's dub their business LEGO. It is a contraction of the Danish words "leg" and "godt". "Leg godt" means "play well" in Danish. Coincidentally, the word lego has the meanings "I study" and "I put together" in Latin.

At this time, the LEGO company only had about six or seven employees. It was also around this time that Ole Kirk's motto came into being as the guiding prinicple for his company: "Only the best is good enough." A funny note about this motto is that, apparently, the original Danish "Det bedste er ikke for godt," when translated literally into English, means "The best is not too good." But you get the point.
(http://www.lugnet.com/pause/chronology.html) www.lego.com