While there are many differing opinions and stories regarding it's origin, after some research the most likely one seems to be as follows. In mid 17th century Claddagh there was a young man by the name of Richard Joyce. Young Mr. Joyce was a hardworking and devoted young man who was engaged to a beautiful young Irish lass. During the week the happy young couple were to be married Richard was returning from a voyage to the West Indies plantations when the ship he was on was attacked by Algerian pirates and the whole crew was taken captive. Richard was then sold into slavery to a Moorish goldsmith. It was here that Richard became a master of the trade and where he came upon the idea for the Claddagh ring. In 1689 when William III came to power and worked an agreement that all subjects in captivity by Moors were to be released. The Moor who owned Richard tried to keep him for he had endeared himself to the young man and he even offered Richard half of his entire fortune and his only daughter's hand in matrimony! Richard refused the offer and returned to Claddagh where he gave the first Claddagh ring to his bride-to-be and they were soon wed.
To conclude I would like to point out one of the awesome aspects of the ring. Depending on where and how you wear it depends on your current marital status! If one's heart is open and free then the ring is worn on the right hand with the crown towards your body. If one is considering an others love (typically dating or courting) then the ring is still on the right hand, but with the crown facing out. If one is engaged then the ring changes hands over to the left and is worn with the crown facing your body. When you marry, the ring still on the left hand changes so the crown faces out. Another point is that even though it was originated by an Irishman the tradition of the Claddagh can be used by anyone regardless of ethnic background.