History
Type 1 and Type 3 fonts were introduced by Adobe in 1984 as part of the PostScript page description language. They did not see widespread use until March 1985, when the first laser printer to use the PostScript language, the Apple LaserWriter, was introduced.
Although originally part of PostScript, Type 1 fonts used a simplified set of drawing operations compared to ordinary PostScript (programmatic elements such as loops and variables were removed, much like PDF), but Type 1 fonts added "hints" to help low-resolution rendering. Originally, Adobe kept the details of their hinting scheme undisclosed and used a (simple) encryption scheme to protect Type 1 outlines and hints, which still persists today (although the encryption scheme and key has since been published by Adobe). Despite these measures, Adobe's scheme was quickly reverse engineered by other players in the industry. Adobe nevertheless required anyone working with Type 1 fonts to license their technology.
Type 3 fonts allowed for all the sophistication of the PostScript language, but without the standardized approach to hinting (though some companies such as ATF implemented their own proprietary schemes) or an encryption scheme. Other differences further added to the confusion.
The cost of the licensing was considered very high at this time, and Adobe continued to stonewall on more attractive rates. It was this issue that led Apple to design their own system, TrueType, around 1991. Immediately following the announcement of TrueType, Adobe published ”Adobe type 1 font format”, a detailed specification for the format. Font development tools such as Fontographer added the ability to create Type 1 fonts. The Type 2 format has since been used as one basis for the modern OpenType Format.
Read more about this topic: Post Script Fonts
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