For such a small place Gibraltar has a lot of history, and the dispute over sovereignty between Spain and the UK is not the first to take place there. A lot of this is because of its position - it is right in the south of Spain, just on the edge of the Mediterranean and only a short distance by sea from North Africa. In fact it is less than 25 km from Morocco so has always been a convenient point between the African and European continents.
Gibraltar has been inhabited or used by people since very ancient times – it has human remains going back 50,000 years and in ancient history was used by Phoenicians and Carthaginians, as well as later by the Romans, as a place of worship. In ancient times it was associated with the cult of Hercules, but people didn’t permanently live on the Rock itself. In those days it was known as Mons Calpe, or the hollow mountain.
Gibraltar was established as belonging to the Kingdom of Hispania (the Spanish Kingdom that ruled the country after the end of the Roman Empire, from around the 5th century CE). The first people actually to live on the Rock (apart from the settlers of prehistoric times) were the Moors who invaded Spain early in the 8th century. From 711 they called it the mount of Tariq – ‘mount’ in Arabic is ‘jebel’, which is where the name Gibraltar comes from. This was the beginning of Gibraltar being fought over, as the Spanish took it back from the Moors in the 14th century but lost it again. They finally gained control over the territory in the 15th century as part of a wider fight against the Moorish presence in Southern Europe.
Gibraltar was officially part of Spain from 1462 until it was taken over in 1704 by the Anglo-Dutch forces who were fighting in the War of Spanish Succession that involved several European countries. This was went on for another 9 years before a treaty, known as the Treaty of Utrecht, was drawn up in 1713 under which Spain agreed to give up certain possessions. One of these was Gibraltar and it was officially handed over to Britain.
Britain and Spain would be at war again several times in the 18th century, and Spain made many attempts to win back Gibraltar. By the end of the century the military attempts had ceased, but Spain continued, and still continues, to seek to regain the territory by diplomatic means.
Under British rule, Gibraltar was again of great strategic importance (probably a major reason why Britain always refused to give it back). It played a key role in several wars including World War II. Today it is no longer considered important from a military point of view, though it has long been a wealthy area and its inhabitants have a special tax status (something many people. Including many people in the UK, consider unfair). However, unless there is a change in the situation Britain is unlikely to agree to a change in Gibraltar’s sovereignty. This is partly because the territory has now been a UK possession for over 300 years, which is longer than it was officially a Spanish possession, but more importantly because the inhabitants, whenever they are polled, vote overwhelmingly to remain British. Until that changes it is unlikely that the UK position on this question will change either. Some observers think Spain would have a better chance of getting the Rock back if their government had a campaign to convince the Gibraltarians that they would be better off under Spanish rule; this remains an option.