It all started sometime in the late seventies, when Ferdinand Piëch, grandson of Dr. Porsche challenged Audi’s best engineers to build a new car, its only design requirements that it be the embodiment of their collective dream drive. Enter chassis engineer Jörg Bensinger, who proposed the basic Quattro formula after being inspired by his discovery that nothing could out-perform a VW Iltis (a Jeep used by German military) on snow, regardless of power.
Here is a short video presenting the quattro story and some.