People used petroleum products in the Cascuses and Mesopotamia long before modern engines. However, in the absence of drilling technology, it was mostly only available from surface seeps as heavy tar-like sludge.

These natural tar seeps we used as a source of tar for waterproofing, medicine and sometimes fuel. Usually the it was used for fuel by soaking logs in the tar, which would make them burn longer and hotter. Tar is still used today as part of medical preparations for the treatment of skin diseases like psoriasis.

Naturally occuring gas fires in what is today Northern Iran and Azerbaijan were often the sites of Zoroastrian fire temples.

In early modern times, by far the largest use of petroleum was as a source of tar for shipbuilding and other types of waterproofing of structures and boats.

In Europe the heavy oil sands in Merkwiller-Pechelbronn were heated over a fire to extract the tar for commercial use in construction and boat-building.

If you ever get a chance, the Musee de Petrole there is very neat, with exhibits about the early history of oil mining and later oil drilling.

In terms of what people thought of it? At least in France and Germany, people thought tar and oil sands "grew" in the Earth, underground, much as other mineral resources like peat and ore were considered to be "grown" somehow underground.