The term "fog of war" first comes from Carl von Clausewitz's seminal 1832 work On War. In English (Clausewitz was a Prussian), the key quote is:

War is an area of uncertainty; three quarters of the things on which all action in War is based are lying in a fog of uncertainty to a greater or lesser extent. The first thing here is a fine, piercing mind, to feel out the truth with the measure of its judgment.[1]

Essentially, Clausewitz argued that battle was almost impossible to completely understand. Everything from the enemies actions and his intent, even down to the actions of your own troops is wrapped in a heavy fog of uncertainty. Without firsthand knowledge (ie., seeing the event for yourself) commanders are constrained by the accuracy of their intelligence, and their mental capacity to sift through that information to accurately, effectively, and quickly make a combat decision. This is a central concept of Clausewitz's system, and one which permeates most modern military thought.

[1] Clausewitz, Book 1 Chapter 3.