Rick,
The number (#) screw system is one of those historical curiosities. It was an artifact of the American wooden stove industry of the early 19th century. There are several people/companies that are candidates for starting it, but it is hard to lay blame at this displacement in time. The proposal within the stove industry was to have screw sizes from 1/16 (.0625) inch through 1/4 (.250) inch by 1/64 (.0156) inch increments. The problem was that micrometers were not particularly good at this time. After a number of times around the mulberry bush, they came up with #0 = .0600 inch as the basis. Each increment above that (#1, #2, ... #14) was the number value multiplied times .0130 inch added to the basis (.0600 inch). Each increment below that (#00, #000, or #0000) was the number of zeros multiplied times .0130 inch subtracted from the basis (.0600 inch).
Thus, a #6-32 has a major diameter of 6 X .0130 + .0600 = .1380 inches. A #4-40 has a major diameter of 4 X .0130 + .0600 = .1120 inches. Sizes #7, #9, #11, and #13 were discontinued in (about) 1845. Sizes #12 and #14 are normally only found in ordinance manufacture today.
If you want to know everything there is to know about the American Unified National (and other) threads, google
FED-STD-H28. This is
the official US Government handbook on the subject -- and it is still available for
free. If you go to
http://www.scribd.com/Lew%20Merrick, you will find a number of technical papers that may be of interest. One is my
UN Thread Data Chart that provides quite a bit of information on Unified National threads reduced to table format.