I heard this on NPR, the person speaking was a representative of Merriam Webster. He just sort of mentioned this fact off hand but I'm having a very hard time believing it's true.
Not quite, it seems. According to the OED: "hello" is a variant of "hallo" which is in use from ca. 1830. "Hallo" derives from German "hallo, halloh," also Old High German "halâ, holâ," imperative of "halôn, holôn" to fetch, used especially in hailing a ferryman. Also written "hullo(a, hillo(a, hello," from obscurity of the first syllable. The origins of some sort of shout along these linguistic lines traces to the fifteenth century.
A minor bit of trivia is that Alexander Graham Bell's preferred telephone greeting was "Ahoy-hoy". Montgomery Burns (Mr. Burns) from the Simpsons uses that exact phrase because he's just that old.
It wasn't invented for the telephone, it was adapted for it.
The word existed but did not have the greeting meaning that it has today.
Quite a few variants existed in the mid 1800s, some going back to at least the 1400s in English; 'hello', 'hullo' 'hallo' 'holla' etc.
These were used as interjections when calling for attention and as commands to hunting dogs (like tally-ho)
The use of 'hello' as an interjection rather than as a greeting still exists in the stereotype of the British policeman saying 'hello! hello! hello!, what's all this then?!' a stock phrase which pre-dates the telephone and which means 'Oi! What's going on?!'
The old meaning of the word as a shout for attention is reflected in the related word 'holler' back in the mid 1800s' you would 'hallo' at someone just as you might 'holler' at them today.
http://www.npr.org/blogs/krulwich/2011/02/17/133785829/a-shockingly-short-history-of-hello
http://www.nytimes.com/1992/03/05/garden/great-hello-mystery-is-solved.html
http://www.snopes.com/language/eponyms/hello.asp
https://www.youtube.com/watch?v=7xXSw07zrio (QI clip)
Note - OED is cited by a few of these sources, I don't have access to the full OED to cite it myself here, although various dictionary sites give snippets of the OED entry with this basic info.
I have heard that the Japanese moshi moshi works in a similar way but that it continues to only be acceptable in telephone conversation. Can any Japanese speakers verify this?