From the start of film illusion has always played an important role. In-camera effects, like jump cuts, superimpositions and the use of miniatures, back projection, or matte paintings were the earliest effects.
The first special effect was used with the beheading of Queen mary of Scotland. It was the first use of the so called Jump Cut. Jump Cuts can be made by stopping the camera, reframe and change the character’s position, or re-staging and start filming again.
Superimpositon is the technique of placing two or more images over each other in one frame. It is often used to introduce ‘spiritual’, ghosts or fantastic creatures into the film. An example is the 1901 Christmas Carrol:
Miniatures are still often used with Special Effects. Terry Gilliam is a fervent user of miniatures. A really interesting behind the scenes video of “The Imaginarium of Dr. Parnassus” will give a closer look into the making of these miniatures and SFX.
Back Projection, also called Rear Projection is the technique of using a foreground with an existing background, these could be a matte painting, or other another film real. Rear Projection explained in the 1933 King Kong film:
Ground breaking for the development of effects was the introduction of the ‘Schufftan Process’ with Metropolis (Fritz Lang 1927), which is still being used today. This process uses mirrors to make small objects appear large by ‘bending its image’ via mirrors.