Chillies (chilies) are an amazing spice in that they have both gained universal appeal and represent one of the few spices to travel from the New World to the Old. They are the fruit of members of the Capsicum genus of flowering plants (all members of the Solanaceae (deadly nightshade) family of plants and range from sweet bell peppers (no heat) to the Naga chilli (currently the world's hottest).
They all originate in the Americas, where they have been cultivated for at least 7500 and they were probably probably an essential component of the Mesoamarican diet (which relied on maize and beans as a staple) as the high vitamin C content of red peppers increases the uptake of non red blood cell iron in diets containing little or no meat. For this very reason they are a crucial component of the West African diet today.
Christopher Columbus encountered them on his first voyage to the Carribean in 1492 and though he did not bring any back on that voyage (they were taken to Spain on his second voyage) he does wirte of a 'pepper' that the natives called Ají which was better in taste and nature that ordinary peppers. However, it was the Portuguese who, in 1498 took the chilli pepper (most notably the piri-piri chilli) back to Portugal and the Cape Verde islands. But as they sought to exploit their foothold in the Americas they brought chillies to West Africa and African slaves to Brazil. Chillies, most notably, the piri-piri did so well in West Africa that they became wild and naturalized and now the piri-piri grows wild in West Africa (which is why, even to this day it's often mistaken as an African native). Between 1498 and 1549 the chilli spread eastwards both over the silk route and through Portuguese conquests in India, the Spice Islands, China and finally Japan so that by 1549 the chilli was known as far as Japan.
It's amazing that, during the time of fairly primitive sailing ships the chilli had spread across the entire globe in just 50 years. This speaks to the true power of chillies as a spice. The perfect spice is typically taken as black pepper which offers both flavour and 'heat' to a dish. All other spices are pale imitations of black pepper in that they tend to have uncomfortable levels of bitterness. Chillies are amazing in that they have perfect heat but no bitterness at all. When used fresh they contain lots of vitamin C (often absence in many diets) and can mask bitterness and putrefaction in other ingredients. Thus the addition of a little chilli can make meals far more palatable than they might otherwise be. Chillies can also be dried and ground without losing much of the 'heat' quality (though the flavour of the raw fruit is often lost).
The heat in chillies is created by the chemical, capsacin, These are hydrophobic (water-hating) chemicals and this is why they tend to bury themselves into the surfaces of the palate and the mouth causing irritation (the burning sensation; indeed the chemical is produced by the plants to deter predation by animals). This is also why drinking water is ineffective as a way of eliminating the burning sensation. The capsaicinoids do not dissolve in water and are simply spread by it. However, foods rich in fat such as milk and yoghurt will eliminate the chemical (this is why yoghurt is served with many Indian dishes). Despite the chillies spreading throughout the world very quickly, where they did not truly catch on was Europe. ndeed, for centuries most Europeans believed that chillies were sourced originally form India and it wasn't until 1868 that Europeans learnt that chillies did not originate from India, but rather came from South America. And some of this confusion remains to this day, with the belief that piri-piri chillies (also known as pili-pili, African Red Devil and African Birds' Eye) are native to Africa
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Dyfed Lloyd Evans runs the Celtnet Recipes site where you can find many hundreds of Chilli-based recipes as well as a history of spread of chillies. See the chilli spice page to learn more about chillies as a spice.