Spiritualism was founded in Hydesville, New York on March 31, 1847 by three sisters; Margaret, Katie, and Leah Fox.  They claimed that the spirits of the dead were communicating with them through a series of rapping sounds.  They claimed to be talking to various famous dead people bringing their messages from beyond the grave.  Many people examined their claim, proclaimed them to be genuine, and they became about as big of world celebrity as you possibly could in the 19th
century without being a head of state.  It didn't take much longer for hundreds if not thousands of immitators to spring up around the world.

Unfortunately, those claims weren't examined very well.  In 1888, Margaret Fox reveals publicly how she and her sisters faked the whole thing by popping their knee and toe joints.  She's quickly denounced by her sisters and other spiritualists.  Even then, many people refuse to believe that she faked her communications.

As early as 1857, stage magicians were exposing fake mediums for publicity.  Carl Herrmann is the first that I know of as he investigated the Fox sisters as part of a promotion for an American tour.  He, two Harvard professors, and an editor for the Boston Courier posed the spirits a question but kept it secret from the sisters.  Naturally the spirits could not answer reply.  Perhaps not as clean or dramatic of exposure, but he started a long line of magicians exposing such fraud that continues to this day with people like the Amazing Randi.

That's the beginning, let's jump ahead a few years.  At the turn of the century spiritualism had been getting more and more complex.  Famous mediums manifested "ectoplasm", levitated, and performed automatic writing.  Spiritualism had grown to have approximately eight million adherants.  It had it's ups and downs, but during the 1920's it was another high point.

It's most famous adherant was Sir Arthur Conan Doyle who was apparently nothing like his famed creation when it came to logic.  Conan Doyle ("Conan" is part of his last name, in case you're wondering, not a middle name) was a regular attendee of seances and most infamously was the source that gave a bit too much credance to some faked photographs of faeries (yes, the little winged ones).

He was also good friends with Harry Houdini who regularly exposed mediums and other spiritualists as part of his promotions.  Houdini would also perform many spiritualist tricks on stage before an audience exposing how he did them afterward (he also gained a few people believing he genuinely had spiritual powers despite his protests).