Myelin sheathing originated in placoderms
Zalc et al published a paper earlier this year in Current Biology hypothesizing that vertebrate myelination developed in the now extinct class placoderms. It is a horrificly concise paper (that is a good thing), and their evidence is simple. As compared to ostreostaci, a class that preceded them, placoderm fossils suggest oculomotor nerves that are 10 times longer, despite having oculomotor foramina of similar diameter.
In living animals, a higher ratio of nerve length to diameter is found whenever the nerves are myelinated. This makes sense, because myelin allows action potentials to propagate down nerves faster and with less energy because the potentials can “hop” from one node to the next. Without myelin, another strategy to make nerves longer is to increase axon diameter, which also increases impulse speed, although it comes at the cost of higher energy and space constraints. Therefore, if placoderms are shown to have had a high ratio of nerve length to diameter compared to unmyelinated species, it means that their nerves were most likely myelinated.
Myelin evolution is interesting in particular because some species have the ability to regenerate their myelin when it is damaged (for example, in goldfish), but at some point this ability was lost. If we could figure out the exact mechanism by which myelin sheathing evolved, we could perhaps develop a drug that allowed for myelin regeneration in humans as well.
Reference
Zalc B, Gouget D, Colman D. 2008 The origin of the myelination program in vertebrates. Current Biology (18): 511-512.