Honestly didn't have an answer for this... so I went to the source. Per Pixar's website:
1986
"Steve Jobs purchases the Computer Graphics Division from
George Lucas and establishes an independent company
to be christened "Pixar." At this time about 44
people are employed."
I would really love to read a book about the history of Pixar, or even a documentary as I have been fascinated with them since seeing Toy Story for the first time. Here is what I could quickly piece together, based mostly on Wikipedia (for what that's worth):
George Lucas was not able to fully tell his space opera stories due to limitations of the technology of the time. The clunky animation (Imperial Walkers as an example) and models with green screens weren't cutting it. Computer technology was just starting to take off... and I think he knew they were the future. So he starts putting together a team to create what would be called CGI. Enter Ed Catmull and eventually John Lasseter. Lucas eventually created and independent company for developing hardware for computer animation. Lucas needed an investor, Jobs was interested. Eventually Jobs bought the company and called it 'Pixar' (according to Wikipedia, the early graphics computers were called Pixar Image Computers - thus the new company name). Disney was an early buyer of these computers. Pixar continued to develop animation software in addition to the hardware, and eventually sold off the hardware division of the company. Through their hardware relationship with Disney, and the success of the animation software, Disney and Pixar agreed to collaborate on 3 full length animated features. Pixar would produce the movies and have full creative control, Disney would distribute them. Toy Story was born. Lots of money was made. Then there were many years of head butting between Jobs and Eisner during the production of the next 2 movies from the 3 movie agreement (The Incredibles and Cars). Lots more money is made. During the production of Cars, Disney was negotiating to acquire Pixar. On again off again negotiations continued until Eisner left Disney. Negotiations started again when Bob Iger took over, cooler heads prevailed, and eventually a deal ($7.7 Billion) was struck just before the release of Ratatouille. The rest is history.
I stand corrected Andrew. Pixar had full creative control over the production of the first 3 Pixar full length features, Disney strictly distributed them. And truth be told, Pixar has remained an autonomous entity even under Disney with full creative control. Pixar personnel do not creatively interact with Disney Animation, and vice versa.