I'm aware that Dragons are a very old and important creature in Asian culture and myth, but how did this imagery of Dragons spread to Europe? Was it coincidence that both peoples had fables with dragons? Was there knowledge of dinosaurs somehow to spark this idea?
This post by /u/einhverfr from one of the post in the Faq seems relevant to your question.
"This is a very fascinating topic. The fact is that when one starts to look closely, the idea of universal dragon stories tends to fall away because what seems to be like a dragon one place may be very much unlike a dragon somewhere else. For example, in Chinese legend, dragons are heavenly creatures while in Japan (according to my conversations with Shinto Priest Koichi Barrish, of Grand Tsubaki America), they are earth creatures. Similarly what we associate with dragons today, like wings or breathing fire, are not present at all in the Norse stories, and in the Irish Ulster Cycle, the appearance of dragons in the prelude are associated with snowstorms.
So I think that one thing that is important is to recognize that the category of "dragon" is used to cover a wide range of mythical beings and to some extent we are projecting a unity through such a categorization that doesn't necessarily exist.
There is some connection between these though, namely that they are mostly great serpents (sometimes with legs) or far more occasionally lizards.
One possible solution is that the general mythologization of animals is common, and snakes seem to be a pretty common target. These include both snakes made large (i.e. dragons) and made small (the various work charms Calvert Watkins links to this structure in "How to Kill a Dragon"). This makes sense anywhere poisonous snakes are found, as they represent a sort of hidden danger.
Additionally snakes and worms share a special relationship with the earth, especially when one sees worms as little snakes. It's also worth noting there are mythological reasons to connect maggots and dragons in Norse myth as well (dwarves are said by Snorri to be created from the maggots that grew in Ymir's flesh, and the same decay is connected with the serpents gnawing on the roots of the tree in Grimnismal, underground).
If you look at the general research which has been done on oral-formulaic approaches and cognitive thinking (good summary in "Orality and Literacy" by Walter Ong), the emphasis on re-usable patterns I think provides an important point here. People observe maggots growing in dead animals, they observe works in the ground and parasitic works in feces, and they observe people dying from snake bites. The Great Mythologised Serpent, or dragon, is an application of that pattern.
It's worth noting further that rotting is incredibly important to human life. Not only is it harnessed to preserve food, but without rotting, many cloth (such as linen) and rope products would not be possible. The first step in making many of these is simply to take the plant matter, submerge it in water and let it partially rot.
Add to that cultural contacts....
Anyway I don't think that is the whole story (as if that is possible) but I think it may be a start."
You also might want to read a copy of, "An instinct for Dragons", by David E. Jones
I've always wondered whether people finding fossils of dinosaurs—likely recognizable as skeletons from a great beast—didn't help establish some of these stories. Is there any reason to believe this may be true?
To add on to this question: the Romans seemed to adopt this imagery in the later years of the Empire (note, the position of draconarius), which then was passed on to the Byzantines, who used it most prominently on the decorative bronze heat shields and nozzles of their Greek Fire weapons. Did this imagery come from the Orient? Or was it indigenous?
just FYI, there are a few posts on dragons in the FAQ* that can get you started until someone drops by with something more comprehensive
*see the link on the sidebar or the wiki tab
I haven't seen this mentioned on any of the other dragon threads, and to me it seems like a very important component to answer this question.
In "An Instinct for Dragons" David E. Jones argues persuasively for an evolutionary origin to dragons. Basically, our primate ancestors had a series of predators that got merged together. For example he notes that in the vervet monkeys there is a warning call for a large cat (lion/panther, etc), a warning call for a serpent, and a warning call for a bird of prey. Yet there is also a general purpose warning call that combines aspects of all three. A dragon is simply the condensation of our three primordial predators into one fear.
Stepping out of a scientific perspective to a more cultural perspective dragons have a neat way of lining up with ancient cosmologies. Although there is tremendous variation it is not uncommon for ancient peoples to divide their understanding of the universe into three basic realms, the underworld (snake), earth (lion/panther, etc) and sky/heaven (bird/bat). Many cultures have a myth about a world tree or a tree of life that serves as the central pillar of this universe holding it all together and connecting the three worlds (the roots, the trunk and the branches). Interestingly enough the world tree is often guarded by a dragon.
Worth noting is that Chinese long (poorly translated as "dragon") do not breath fire and do not necessarily fly. They also tend to be water spirits and aren't really similar to dragons at all apart from the reptilian connection.
Actually, in Norse mythology dragons are more serpent-like and drips poison from their mouths, have no wings, do not fly and sucks blood from the dead in Hel and Nihögg, hating life so much constantly gnaws at one of the roots of Yggdrasil, the world tree.