There is no doubt that hypnotism is a very old subject, though the name was not invented till 1850. In it was wrapped up the "mysteries of Isis" in Egypt thousands of years ago, and probably it was one of the weapons, if not the chief instrument of operation, of the magi mentioned in the Bible and of the "wise men" of Babylon and Egypt.
Since this original inception of hypnosis, the field has grown widely within the west as well as the east. It's been guised under many different names, such as "mantras" and "meditation" and other such things, however it does not change the fact that hynosis has, and continues to be, a field that is quite unique in itself.
After hypnosis gained widespread acceptance and understanding within the west, it was not long until the field of mentalism also followed suit. Mentalism perhaps derived from entertainment hypnosis, and was created as a way to give people the illusion of supposedly supernatural abilities. Indeed the ability to make people think that you had a psychic insight into their minds, when all you were doing was quite simply hypnotizing them, stirred a lot of controversey, especially in medieval London.
This form of hypnosis later evolved into the field of mentalism, and for the first time people could see that it was possible to hypnotize someone without them being consciously aware of it. This gave birth to the field of covert hypnosis, and many other related disciplines within the hypnotic fields, such as conversational hypnosis and Ericksonian hypnosis.
Hypnosis is of course not a field without its controversies. Many people would claim that hypnosis would make others go insane, or could be used for ill intent. Since then we have done a lot of research into the hypnotic processes and how they work, and we have discovered that indeed hypnosis cannot be used against a person's conscious will, and therefore cannot be used for ill intent, unlike what a lot of the traditional critics of the late 17th century believed.
As hypnosis and mentalism gained wider understanding and acceptance, the two fields slowly drifted apart into their separate, unique disciplines. Today there is little correlation between the two, as mentalism is more suited for entertainment magic, whilst hypnosis is now used more in mainstream hypnotherapy.
One thing is for certain, and it's that the history of hypnosis and mentalism can be credited to a few unique individuals, most notable of which was perhaps Anton Mesmer. Within modern times we owe the development of covert hypnosis to Milton Erickson. In terms of mentalism, this field has been explored and shown to have great effect by famous psychological illusionists such as Derren Brown, and David Copperfield.
It is difficult to say what the future will hold for hypnosis and mentalism, however there is no doubt that these two fascinating fields will continue to awe, amaze and help people for centuries to come.