How? Part of my childhood love of player options; part of my adult (if you say so) project of rereading my library.
What? I have no idea what the first instance of "psychic powers in fantasy world" might be. I guess Dragonriders of Pern, which isn't straight fantasy, but has the trappings, has some telepathic bonding with the dragons?
Well, as far back as 1976, in _Eldritch Wizardry_, Gygax and co. were putting psionics in D&D, and it's been there pretty much ever since, even though it doesn't entirely make sense. Like: in a metaphysics where you have magicians manipulating underlying forces of the world to create magical effects, what does it mean that some people can just do that with their mind?
(Personally, I might argue -- and this is a lot of projection on my part -- that the nerds who started D&D hit on psionics as the power they would most like to have or be most likely to have, since they would consider themselves big brains compared to the folks around them. It's a variation on the SF superiority that gave us "Fans are slans" -- literally comparing fans to the superhuman slans of Vogt's work.)
Anyway, psionics sort of limped along in D&D -- maybe it's just the power fantasy needed another layer of power fantasy? -- with an appendix in the AD&D Player's Handbook and some notes on psychic combat in the Dungeon Masters Guide. (Don't take my word for it -- I have those books, but they are in the other room.) Until 2nd edition came out, and this book totally remade psionics in D&D.
The core idea is still there: you use your mind and willpower to do psychic stuff; and anyone might possess one of these wild talents. But now also there's a whole character class and a lot of new powers. A huge chunk of this book is given over to those new powers, and in classic D&D fashion, they are broken up into different disciplines (just like schools of magic) and also major/minor powers, and each character can only know so many, etc. Unlike magic, these powers are skills (so you have to roll them to see if they work) and they are powered by will (so you can use them as many times as you want, as long as you have the will points).
There's a little bit on how psionicists might fit in the world, but this book is doing work totally different from the first four PHB supplements: the job here isn't to talk about how this psionicist is different from that one, but to totally reinvent the psionicist. And the burden of differentiating psionicists is largely borne by the huge and varied power list they have.
And, others have said, I don't need to, the idea of all these powers being psychic really opens questions about the nature of the universe, and really complicates fantasy without necessarily making it a richer playground, thematically.
Yet, even now, I cannot be objective, because I remember the thrill of looking through these power lists and thinking about what characters (or monsters) could do with such a power. Remember the thrill? I still feel it!
Yeah, so? One big question I've been trying to answer here is "do I keep this book or not?" And a subquestion of that -- one I didn't even know I was looking at -- is "why is this book exciting or boring to me?"
As I said, I can't be objective -- something about this was implanted in me ever since I read Blade of the Poisoner (bought at a Scholastic Book Fair), with its heroic kid awakening his psychic potential to fight evil. And yeah, in some ways, psychic powers are even more potent of a power fantasy because they seem to have the whiff of the real (especially true in the 80s and 90s, not now when the idea of "mind over matter" runs into the brute reality of blood sugar, which is real magic: are you angry or just hungry?)
So: is this a good D&D book to use at the table? Probably not, for many reasons. Is this an exciting book that might spark an idea for a game? Yeah, I think so.