2010-11-14 appamatto came up with an idea on the #bitcoin-dev IRC channel:
23:32 appamatto: I had an idea for a bitcoin-like DNS system. Basically, each generating block allows you to define a new name, and transactions are remappings of the names to ip addresses
00:01 theymos: Why not just generate "domain credits" that allow you to generate a domain, and then transfer those around, too?
#bitcoin-dev IRC log 2010-11-14
#bitcoin-dev IRC log 2010-11-15
He then took the discussion to Bitcointalk: Bitcointalk: BitDNS and Generalizing Bitcoin
2010-12-04 kiba starts a bounty thread Bitcointalk: BitDNS Bounty (3500 BTC)
2011-04-18 vinced announces Namecoin on Bitcointalk Bitcointalk: [announce] Namecoin - a distributed naming system based on Bitcoin
Certainly one motivation for BitDNS was fear of Bitcoin related domains being censored. 2010-12-02 wikileaks.org was troubled.