Pazyryk rug (ca. 300 BC)
The world's first knotted rugs were probably made just south of the Caspian Sea in what is now northern Iran. They were all made of wool, and they used the same types of patterns that people were using to embroider on their clothes, or (if we believe Herodotus) painting on their clothes. Probably the same patterns were used on walls, and on jewelry.
Knotted rugs were a great luxury to trade for the nomadic herders of Central Asia. They took forever to make, so they were extremely expensive. But you could carry them strapped to a horse: they wouldn't break like glass, and they weren't heavy like wood or metal. And when you got where you were going, they made nice floors and walls for your yurt or your tent. Little boys could make them, and little boys weren't good for much else, so their labor was cheap.
Once the Silk Road got going, about 200 BC, the traders of Central Asia found that knotted rugs also made great things to sell to Europeans in the west and to the people of China in the east. Europeans and Chinese people paid very high prices for these rugs, and the rugs got bigger and fancier. Sometimes people even made them with silk instead of wool: those rugs had brighter colors, and were even more expensive.