This three terminal character of the transistor is what allows us to make an amplifier for electrical signals, like the one in our radio. With the three-terminal transistor we can also make an electric switch, which can be controlled by another electrical switch. By cascading these switches, switches that control switches that control switches, etc., we can build up very complicated logic circuits. These logic circuits can be built very compact on a silicon chip with 1,000,000 transistors per square centimeter. We can turn them on and off very rapidly by switching every 0.000000001 seconds. Such logic chips are at the heart of your personal computer and many other gadgets you use today.
In 1947, John Bardeen and Walter Brattain observed that when electrical contacts were applied to a crystal of germanium, the output power was larger than the input. William Shockley saw the potential in this and worked over the next few months greatly expanding the knowledge of semiconductors and is considered by many to be the 'father' of the transistor. The term was coined by John R. Pierce. They quickly made a few of these transistors and connected them with some other components to make an audio amplifier. This audio amplifier was shown to chief executives at Bell Telephone Company, who were very impressed that it didn't need time to warm up like the heaters in vacuum tube circuits. They immediately realized the power of this new technology.