(FORTUNE Magazine) – IMAGINE YOURSELF living 100 years ago on Detroit's Bagley Avenue. It's 2 a.m. on June 4, 1896, and the sound of steel striking stone has drawn you out of bed and into the night. The noise and puffs of powdered mortar are coming from the coal shed behind No. 58 Bagley (on the page opposite). Bricks from the outer wall tumble to the ground. Soon you can make out the figure of young Henry Ford and, coming through the door he has just widened with his hammer, a fragile-looking vehicle with four bicycle wheels, a horn made from a doorbell, and a tiller steering wheel. You have just glimpsed Ford's first automobile.

But you have also witnessed the birth of something else just as magical in its way. You have been present at the creation of the American garage. Earlier, there were carriage houses, sheds, barns, privies, and other worthy outbuildings, but the garage as we know it today came with the automobile, a snug place to keep that vulnerable machine out of the weather.

In America, however, the garage is not just a place to protect cars, old magazines, record albums, and toasters that will definitely be repaired someday. It is a laboratory, a skunkworks, a stage, a studio, where dreamers have transformed fantasies into industries that have changed the world. The garage is, in a way, the U.S.'s secret weapon, a partial explanation of why Americans still seem to have an inventive edge. The Japanese have lots of cars but relatively few garages, and cramped ones at that.

In the pages that follow, FORTUNE celebrates a century's worth of these humble domestic laboratories--where Walt Disney drafted his early cartoons; Steve Jobs and Stephen Wozniak pieced together the first personal computer; Lila and DeWitt Wallace nurtured the Reader's Digest; Buddy Holly and the Crickets rehearsed the music that helped create rock-and-roll; and C.E. Woolman turned a crop-dusting business into Delta Air Lines. As you read this, thousands of their successors have retreated to their garages, where, between lawn mowers and broken clothes washers, some of them are likely creating the FORTUNE 500 companies of the next century.

HENRY FORD GARAGE 58 Bagley Avenue, Detroit Henry Ford might have passed away in obscurity had it not been for a neighbor who was generous enough not only to give up his rights to a coal shed but to help remodel it to the inventor's convenience as well. In 1896, Ford had been experimenting at home with a primitive gasoline engine, which he placed in the kitchen sink. Wires ran from a ceiling light to the spark plug. While his wife, Clara, regulated the gas flow, Henry spun the flywheel, and the engine erupted into a cacophonous 30-second performance.

But Ford needed more room to work on his larger, two-cylinder engine. Some of the neighbors complained about the industrial-size racket coming from Ford's kitchen. Not Felix Julien. Julien, who shared the use of a nearby shed with Ford, was so supportive that he cleared the coal and wood from his side and helped Ford take down the wall that separated the two halves so the inventor could spread out his tools and jumble of parts. And on many nights after Clara and baby Edsel had gone to bed, Julien stood by and offered the weary Ford encouragement (Ford had a day job as chief engineer at Detroit's Edison Illuminating Co.).

Ford had to knock down part of the shed's outer wall to free his horseless carriage. When landlord William Wreford saw the broken wall, he was furious. But then he laid eyes on the automobile and was delighted. Rather than make Ford pay for the damage, Wreford insisted on enlarging the opening at his own expense so the vehicle could pass through more easily. History is unlikely to honor Julien or Wreford much, but they are, along with Ford, the fathers of the American garage. WALT DISNEY GARAGE 4406 Kingswell Avenue, Los Angeles When Walt Disney moved to Hollywood in 1923, he arrived with a half-filled suitcase and a head full of dreams. "Walt's animation business had sort of gone under in Kansas City, and he needed to make a fresh start," explains Disney archivist Dave Smith. "He figured his best chance was out in California. His Uncle Robert lived in a little house on Kingswell Avenue, and Walt figured he could mooch off him for a little while.

"At first Walt thought it would be nice to be a producer. So he haunted the studios and was able to bluff his way onto a few lots," Smith continues. "He even had a few bit parts as an extra." When Walt ran out of money, he borrowed money from brother Roy to pay Uncle Robert $5 a week for room and board. Roy urged Walt to return to the cartoon business. "No, I'm too late," Walt complained. "I should have started six years ago. I don't see how I can top those New York boys now."

But Uncle Robert's patience was running thin, as were Disney's prospects elsewhere. Walt got out of his jam, according to a couple of biographers, when he found a vaudeville house operator who was willing to sponsor a series of simple cartoon reels. So in Uncle Robert's garage, Walt constructed a camera stand from some wooden boxes and a few lengths of lumber. The reels Disney made in the garage--just stick figures delivering jokes in balloons--gave him breathing room. Soon after, he received great news from New York: a contract to produce six animated cartoons at $1,500 apiece.

Uncle Robert lent the boys $500 and helped them find a room behind a real estate office. Roy ran the camera, two girls painted the celluloids for $15 a week, and Walt did the animation. That was the start of the Walt Disney Co. DELTA AIR LINES GARAGE Monroe, Louisiana As a child, C.E. Woolman once requisitioned all the laundry line in his neighborhood so he could build a giant passenger kite. In college he studied insects. Woolman's passions for flight and bugs, neither of which seemed promising at first, later came together successfully in a tile-roofed gas station and garage in Monroe, Louisiana. That noble building, since reduced to the gothic ruin above, was the crib of one of the world's aviation giants, Delta Air Lines.

The boll weevil was ravaging cotton fields in the 1920s. Woolman teamed up with Dr. B.R. Coad, an entomologist who was experimenting with aerial crop-dusting, then a novel idea. Soon Woolman, wearing goggles and flying an old Army Jenny, was buzzing the Louisiana cotton fields.

Huff-Daland Manufacturing Co., a New York aircraft maker, heard of the venture and decided to start a crop-dusting service too. It gave Woolman a job as field manager. Operations began in Macon, Georgia, in 1924 and shifted the next year to Monroe, where Woolman settled into a building that was surprisingly handsome for a former Standard Oil gas station and garage.

Two years later Huff-Daland ran into financial trouble, and Woolman saw an opportunity. He'd already been ferrying mail and passengers in Peru during the off season, an assignment he liked far better than dusting bugs. Using his considerable charm, Woolman raised $40,000 from Monroe's businessmen. In 1928 he renamed the company Delta Air Service--and even gussied up the garage with green and white awnings. Passengers got a four-foot-long ticket counter and a wooden bench. Today Delta carries more passengers than any other airline in the world.

HEWLETT-PACKARD GARAGE 367 Addison Avenue, Palo Alto California has many historical landmarks, but only one is a garage, an unassuming shed in Palo Alto, unadorned except for a braid of morning glories running down its roofline. But out front is a a plaque proclaiming it "The Birthplace of 'Silicon Valley.' "

Two young men were hard at work in the garage, which they rented together in 1938. They had already attempted to craft several electronic products, including a bowling alley foot-fault indicator and a really niche-market concept, a harmonica tuner. But now, as their Sears drill press hummed and a series of instrument panels popped out of the kitchen oven (where they were heated to cure the paint), the tinkerers hoped they were on to something big.

When all the parts came together, William R. Hewlett and David Packard had produced their first commercial audio oscillator, an instrument capable of generating audio frequencies used by the broadcast and entertainment industries, for example, to test sound quality. They named the instrument the Model 200A, which made it sound as if they'd been in business for some time. With no market research, they whimsically priced it at $54.40, after "Fifty-four forty or fight!" the slogan used in establishing the U.S. border in the Pacific Northwest (54 degrees, 40 minutes). Luckily, their nearest competitor was selling oscillators for $400.

To the entrepreneurs' amazement, a few orders started to arrive, some accompanied by checks. The Walt Disney Co., itself just 15 years out of a garage, ordered eight oscillators for Fantasia, its upcoming animated feature. As 1939 arrived, the two inventors flipped a coin to see whose name would lead the new partnership. The coin spun, and when it landed, Hewlett-Packard was in business.

By the end of 1939, sales had soared to almost $5,000 a year, and Hewlett-Packard moved to larger quarters. Almost 20 years later H-P was making over 370 products. In 1972, H-P introduced the first of its acclaimed hand-held calculators. The company also introduced the HP3000, its first general-purpose computer. Laser and ink-jet printers came in 1984. By 1994, H-P's sales in computer products, service, and support alone were almost $20 billion, or about 78% of its total business.

H-P might never have existed if it hadn't been for a Stanford University professor named Fred Terman. It was Terman who urged all his students to stay in the Stanford area and start little businesses. Terman helped Hewlett and Packard set up their garage operation, finding them odd jobs and grants to keep the business alive. Fred Terman is considered a founding father of Silicon Valley, and the Hewlett-Packard garage, the cradle where it all began.

MATTEL GARAGE 6058 SouthWestern Street Los Angeles This is a tale of two garages--exile from one, and refuge and success in another.

In 1940, Ruth Handler, long before she dreamed up the Barbie doll, was a stenographer at Paramount Pictures; her husband, Elliott, worked in a lighting fixtures store and studied industrial design. One day he came home to their small Hollywood apartment with some designs for making giftware with a new wonder plastic called Lucite. "I got so excited," says Ruth. "I said, 'let's go out and buy some equipment, and we'll set it up in the garage.' " So they went to Sears and bought a drill press, sander, band saw, and polisher on credit. Nights and weekends they molded Lucite into hand mirrors, bookends, and such. Unfortunately, the neighbor with whom they shared the garage complained about the noise and mess, and the landlord kicked the Handlers out.

But in time they found the garage of their destiny (pictured below). "Matt" Matson, a colleague and friend of Elliott's at the lighting shop, had gone into business for himself, making picture frames in his garage. When Ruth and Elliott visited Matson in that garage one day, the three suddenly had an idea. With Elliott's designs, Matson's fabrication skills, and Ruth's marketing expertise, they could start a company together. They combined "Matt" and "El" to name their company. Mattel expanded into dollhouse furniture in 1945 and later into toys like the Uke-A-Doodle, a plastic ukelele. In 1958, Ruth dreamed up Barbie, the megababe of toyland and one of the most adored/reviled icons of the century. Today there are more Barbies in the U.S. than there are people, and Mattel continues to sell a billion dollars' worth a year. So why isn't the company called Mattelru or even Rumattel? "It never occurred to me that some part of 'Ruth,' by all rights, belonged in the name," says Mrs. Handler. "Those were the times." APPLE COMPUTER GARAGE 2066 Crist Drive, Los Altos, California When he was in eighth grade, Steve Jobs, later the co-founder of Apple Computer, telephoned William Hewlett, president of Hewlett-Packard. "Bill answered, and I said, 'Hi, you know, uh, I'm 12 years old and I'm trying to build a frequency counter,' " Jobs recalls. Hewlett, a symbol of entrepreneurial success in the Santa Clara Valley, chatted graciously with Jobs for 20 minutes. When it was over, the kid got not only the Hewlett-Packard parts he needed but a summer job at the company as well.

A few years later Jobs was introduced to Stephen Wozniak, who at 13 had built a surprisingly sophisticated calculator. Wozniak and a friend, Bill Fernandez, had been working on a primitive forerunner of the personal computer. Jobs and Woz dropped in and out of each other's lives over the next few years. But in 1975, Woz completed a much improved version of his computer. He took it to Hewlett-Packard, where he worked as an engineer, and Atari, where Jobs was working. Neither company saw much demand for a "personal" computer. But Jobs did and insisted that he and Woz start a company.

They wound up in the Jobs family's garage, where Jobs's father removed his beloved car-restoration equipment and helped the boys by hauling home a huge wooden workbench that served as Apple's first manufacturing base. "It was just the two of us, Woz and me," said Jobs as he returned to that garage with FORTUNE recently and peered into its now empty space. "We were the manufacturing department, the shipping department . everything." A yellowed, 1980 Apple ad that hangs on the wall reads, "What Is a Personal Computer?"

Wozniak now teaches in elementary school, while Jobs has gone on to found Next Inc. and Pixar Animation Studios. Jobs gets phone calls from kids, aspiring entrepreneurs as bold as he once was. "Sure I speak with them. I always try to," Jobs says. "That's the only way I can pay Bill Hewlett back." READER'S DIGEST GARAGE 45 Eastview Avenue, Pleasantville, New York The most elegant garage ever to hold a great American institution might be the one above, in which DeWitt and Lila Wallace nurtured Reader's Digest. "DeWitt was a bit of a carefree boy," says Reader's Digest's public relations director, Craig Lowder. "His father was president of Macalester College in Minnesota, and DeWitt had a very literate upbringing. But he dropped out of school. He worked as a ranch hand for a while, went to the war, was wounded." Later, when Wallace tried his hand at copywriting, he got fired. "Basically, he was a 35-year-old drifter who had a lot of good ideas and talent but not much of a track record," says Lowder.

Wallace had an idea, however, that kept gnawing at him. If there was too much out there to read, why not select the best articles and condense them? Wallace took the idea to several New York publishers--and was rejected by all.

So in 1921 he borrowed $5,000 from his family and with his wife, Lila, started a magazine in a basement apartment beneath a speakeasy at 1 Minetta Lane, in New York City's Greenwich Village. The Wallaces understood the art of storytelling. "The real trick in condensation is in finding the story line," says Kenneth Y. Tomlinson, editor-in-chief of Reader's Digest. "Once you've found that, you've hooked the reader."

Within a year of the first issue, the Wallaces moved to Pleasantville, where they rented from Pendleton Dudley, a New York advertising executive, a garage apartment that was very top drawer: hardwood floors, a fireplace, a kitchenette, and a bedroom. They stayed for about five years. Reader's Digest now sells 28 million copies a month worldwide and is headquartered in a corporate campus modeled on William and Mary College, appropriate for an enterprise that started in a dignified garage.

BUDDY HOLLY GARAGE 1305 37th Street, Lubbock, Texas On clear nights in Lubbock, Texas, you could pick up the faint signal of radio station KWKH, from Shreveport, Louisiana. On some of those nights in 1955, Buddy Holly and his friend Jerry Allison could be found cruising around town with the radio on, tuning into rhythm and blues tunes. Blending the blues of groups like the Spiders with the Western music of Hank Williams, Buddy Holly and the Crickets helped create the beginnings of rock-and-roll.

"Buddy and I flipped over a group called the Spiders. We wanted to name our group after an insect too," says Allison, Holly's junior high school friend and the drummer in the band. So they got out an encyclopedia, flipped past A, paused at B and beetles--only to discard the idea--and finally hit on C and the Crickets.

The band rehearsed wherever it could, including in some of the garages behind the many houses the Holly family rented during those years.

In February 1957 the Crickets recorded "That'll Be the Day," and by late September it was the best-selling song in the nation. The Hollys were living in the house pictured below at the time, so Buddy almost certainly practiced his guitar in the garage and maybe started work on the hits that followed quickly, like "Oh, Boy" and "Peggy Sue." In 1959, at the age of 22, Holly died in a plane crash. "It seemed like I knew him a long time," says Allison, "but it was really so short."

A new family has moved into the house alongside Holly's American garage. Can you hear the youngster on the stoop picking out the beginnings of a song that will go platinum a decade from now? REPORTER ASSOCIATE Shaifali Puri