Professor Noonian Soong had a dream of creating the perfect android with a positronic brain. Ostracized because of his failures, Professor Soong retreated to Omicron Theta to conduct his experiments. He created two such androids before a mysterious and murderous Crystal Entity attacked the science colony, leaving only that android called Data.
The USS Tripoli arrived at the colony to find only Data remaining. When the crew of the Tripoli activated Data, they found the collective memories of the colonists stored in his mind. Furthermore, Data seemed to have purpose, drive, and a strong desire to interact with human beings.
After graduating with honors from Starfleet Academy, Data served on a number of Starfleet vessels and earned several honors and awards for valor.
Captain Picard chose Data for his unique abilities, witch Picard thought would enhance any bridge crew or Away Team. Picard believes that Data offers him a voice of reason, and that is the kind of advice Picard values. Since his arrival on the Enterprise, Data has assumed the role of third in command.

Data is the equivalent of a walking ship library. He has knowledge of everything known to the Federation. As such, he is an invaluable member of the Enterprise.
Data is very literal and can be confused by human idioms and figures of speech. His own attempts to use those idioms are never very successful.
Data also attempts to emulate human emotions, but most of his attempts are not very successful. When he returned to Omicron Theta and discovered his "brother", Lore, he learned that his design specifically prevented him from ever fully blending with human beings. This has not stopped him from trying, however.