Prior to the introduction of digital compositing, the process was a complex and time consuming one known as "traveling matte". The blue screen and traveling matte method were developed in the 1930s and were used to create special effects for The Thief of Bagdad.
The credit for development of the blue screen is given to Larry Butler, who won the Academy Award for Special Effects for the Thief of Bagdad in 1940. He had invented the blue screen and traveling matte technique in order to achieve the visual effects which were unprecedented in 1940. He was also the first special effects man to have created these effects in Technicolor, which was in its infancy at the time.
In 1950, Warner Bros. employee and ex-Kodak researcher Arthur Widmer began working on an ultra violet traveling matte process. He also began developing bluescreen techniques: one of the first films to use them was the 1958 adaptation of the Ernest Hemingway novella, The Old Man and the Sea, starring Spencer Tracy.

The background footage was shot first and the actor or model was filmed against a bluescreen carrying out their actions. To simply place the foreground shot over the background shot would create a ghostly image over a blue-tinged background. The actor or model must be separated from the background and placed into a specially-made "hole" in the background footage. The bluescreen shot was first rephotographed through a blue filter so that only the background is exposed. A special film is used that creates a black and white negative image — a black background with a subject-shaped hole in the middle. This is called a 'female matte'. The bluescreen shot was then rephotographed again, this time through a red and green filter so that only the foreground image was cast on film, creating a black silhouette on an unexposed (clear) background. This is called a 'male matte'.
The background image is then rephotographed through the male matte, and the shot rephotographed through the female matte. An optical printer with two projectors, a film camera and a 'beam splitter' combines the images together one frame at a time. This part of the process must be very carefully controlled to ensure the absence of 'black lines'. During the 1980s, minicomputers were used to control the optical printer. For The Empire Strikes Back, Richard Edlund created a 'quad optical printer' that accelerated the process considerably and saved money. He received a special Academy Award for his innovation.
One drawback to the traditional traveling matte is that the cameras shooting the images to be composited can't be easily synchronized. For decades, such matte shots had to be done "locked-down" so that neither the matted subject nor the background would move at all. Later, computer-timed motion control cameras alleviated this problem, as both the foreground and background could be filmed with the same camera moves

Petro Vlahos was awarded an Academy Award for his development of these techniques. His technique exploits the fact that most objects in real-world scenes have a color whose blue color component is similar in intensity to their green color component. Zbig Rybczynski also contributed to bluescreen technology.
Some films make heavy use of chroma key to add backgrounds that are constructed entirely using computer-generated imagery (CGI). Performances from different takes can even be composited together, which allows actors to be filmed separately and then placed together in the same scene. Chroma key allows performers to appear to be in any location without even leaving the studio.
Computer development also made it easier to incorporate motion into composited shots, even when using handheld cameras. Reference-points can now be placed onto the colored background (usually as a painted grid, X's marked with tape, or equally spaced tennis balls attached to the wall). In post-production, a computer can use the references to adjust the position of the background, making it match the movement of the foreground perfectly.
Weathermen often use a field monitor to the side of the screen to see where they are putting their hands. A newer technique is to project a faint image onto the screen.

Chroma key is a technique for mixing two images together, in which a color (or a small color range) from one image is removed (or made transparent), revealing another image behind it. This technique is also referred to as color keying, colour-separation overlay, greenscreen, and bluescreen.

It is commonly used for weather forecast broadcasts, wherein the presenter appears to be standing in front of a large map, but in the studio it is actually a large blue or green background.The meteorologist stands in front of a bluescreen, and then different weather maps are added on those parts in the image where the color is blue. If the meteorologist himself wears blue clothes, his clothes will become replaced with the background video. This also works for greenscreens, since blue and green are considered the colors least like skin tone. This technique is also used in the movie industry.

The principal subject is filmed or photographed against a background consisting of a single color or a relatively narrow range of colors, usually blue or green because these colors are considered to be the furthest away from skin tone. The portions of the video which match the preselected color are replaced by the alternate background video. This process is commonly known as "keying", "keying out" or simply a "key".

In analog color TV, color is represented by the phase of the chroma subcarrier relative to a reference oscillator. Chroma key is achieved by comparing the phase of the video to the phase corresponding to the preselected color. In-phase portions of the video are replaced by the alternate background video.
In digital color TV, color is represented by a triple of numbers (red, green, blue). Chroma key is achieved by a simple numerical comparison between the video and the preselected color. If the color at a particular point on the screen matches (either exactly, or in a range), then the video at that point is replaced by the alternate background video.

Blue is generally used for both weather maps and special effects because it is complementary to human skin tone. However, in many instances, green has become the favored color because digital cameras retain more detail in the green channel and it requires less light than blue. Green not only has a higher luminance value than blue but also in early digital formats the green channel was sampled twice as often as the blue, making it easier to work with. The choice of color is up to the effects artists and the needs of the specific shot. In the past decade, the use of green has become dominant in film special effects.

Also, the green background is favored over blue for outdoors filming where the blue sky might appear in the frame and could accidentally be replaced in the process. Although green and blue are the most common, any color can be used. Red is usually avoided due to its prevalence in normal human skin pigments, but can be often used for objects and scenes which do not involve people. Occasionally, a magenta background is used.
With better imaging and hardware, many companies are avoiding the confusion often experienced by weather presenters, who must otherwise watch themselves on a monitor to see the image shown behind them, by lightly projecting a copy of the background image onto the blue/green screen. This allows the presenter to accurately point and look at the map without referring to monitors.

Before you begin any construction, it's a good idea to plan your studio layout and green screen size. There is nothing worse than building a green screen which ends up being not quite wide enough.

Set up your proposed studio area and camera(s). Go through every type of shot you could possibly want and measure the total required background area. Allow enough room to change your mind about framing or widen the shot more than you originally thought. Also, allow extra space to the sides of the screen to place lights.

Ideally there should be some space between the foreground subjects and the green screen — this makes lighting easier.

Plan your budget.

There is some debate over which materials are acceptable for use as a green screen. Many professionals will tell you that the colour must be just the right shade of green, or that the screen must be made of certain material. It is certainly true that some materials and colours are better, but in reality you can make an effective green screen from just about any smooth surface.

In the more likely that you would like a cheap option to get started with, you will be glad to hear that it's not hard finding useable material. There are three main options:
1. Use a solid material such as cardboard or wood, painted Chromate.
2. Use flexible or spongy material such as foam, spandex, etc. If you're going this way, you are probably better off to buy professional material.
3. Use some sort of fabric. You can either buy green material or buy white material and paint/dye it green.

Solid Material
Cardboard or wood paint Chromate has the advantage of providing a nice consistent surface, free of wrinkles. The disadvantage is that it's more difficult to pack up and move.
Fabric
Go to a good fabric store and look through the selection — you should be able to find at least several choices.
• The material should not be too reflective — this tends to create lighter "hotspots".
• Lighter, brighter green is better than dark green.
• Material which is crease-resistant is very desirable. Wrinkles are the enemy and you will appreciate material which can be set up and moved without destroying the smoothness.
• Heavy material is good for providing consistent colour, especially if there is any possibility of anything behind the screen showing through. However it can be prone to more creasing.

If you need to pack up the material for storage or moving, roll it rather than fold it — this helps reduce wrinkling. It's a good idea to use a cylindrical object with a diameter of at least 5-10cm (2-4") to roll the material onto, for example, the heavy cardboard cylinders used as the centre of newsprint rolls.
You may want to iron your material from time to time to keep wrinkles away. If you are going to paint or dye the material, make sure you will be able to iron it. Note than ironing a piece of material this large without creating new creases can be a challenge.
Hang the material in whatever manner suits your situation. For example, you could use thumbtacks or a shower rail attached to the wall. To make a mobile screen, use two stands (such as light stands or mic stands) and mount a rail between them. You could also make stands from clothing racks, hat stands, or any similar type of frame.

In case you're wondering, the green screen does require it's own lighting. It's highly unlikely that you would be able to use the screen with existing ambient light or the same light you use for the foreground subjects.

As mentioned previously, you should plan your screen lights before you begin construction. The key to lighting a green screen is consistency. The whole point is to create a single, consistent shade of colour across the entire screen.

Note: Diffusion filters are very handy when lighting green screens. Diffusion helps create more even lighting and reduce the impact of shadows.

You will probably want to experiment with different combinations to get the most even lighting. Once the screen is lit to your satisfaction, add the main lighting for the subjects. At this point you may find that shadows created by these new lights are cast on the screen. Adjust the light positions and filters until you get the best compromise.

Some software packages provide dedicated green and blue screen effects which may require the screen to be a very specific colour. If these effects don't work, use the more general and forgiving chroma key effect.

In most studios there will be some variation in the screen colour, no matter how hard you try to make it consistent. When selecting the key colour, try to select a part of the screen which best represents the overall colour.

Key parameters to adjust include similarity and blending. Experiment with these to see how they work. You will almost always have to adjust these to get an acceptable effect.

Make sure anyone appearing in your video is aware that they cannot wear green (or blue if you're using a bluescreen). You also need to avoid green (or blue) props and other objects. Watch out for logos and symbols on people's clothing — these may be small enough that nobody notices them while shooting, but after adding the key they become horribly obvious holes in the person's body.

As well as avoiding green or blue, you will probably notice that some colours and shades work better than others. For example, dark coloured clothes may create more of a green rim around foreground objects than light colours. You should spend some time experimenting with lots of different colours.