What did we know about Qin Shi Huang's terracotta army before its discovery in 1974?

The terracotta army is only part of an enormous – and still largely un-excavated – mausoleum complex built for the First Emperor. Qin Shihuangdi's tomb proper is a four-sided pyramid, constructed from rammed earth, with three stepped levels, built about 35km to the east of the then Chinese capital, Xi'an. Originally about 120m high, it has been eroded by time, so that now it stands about only 64m above ground level. This pyramid was surrounded by a double-walled compound. The interior walls were pierced by four gates and measure 685 x 578m; the outer ones measured roughly 2.2km x 1km. (Cotterell pp.16-20, Wood p.129)

The answer to your question about knowledge of the terracotta army divides into two: surviving old records and traditions regarding the burial place of the First Emperor (who dates, by the way, only to 259-210 BCE, not to as long ago as 3000 BCE), and modern discoveries that antedate 1974.

Let's deal with the traditions and older records first.

Sima Qian (Ssu-Ma Ch'ien in the Wade-Giles system of transliteration), who wrote his Records of the Grand Historian – a compilation of written records and oral histories combined into an encyclopaedia covering all that was known of Chinese history at that point, albeit one written from the perspective of the succeeding Han dynasty – in the period up to his death in 110 BCE, or up to a century after the First Emperor's death, includes a passage about the preparation of Qin Shihuangdi's mausoleum:

As soon as the First Emperor became King of Chin [Qin, which was in 246 BCE], work began on his mausoleum at Mount Li. After he won the empire [221 BCE], more than 700,000 conscripts from all parts of China laboured there. They dug through three underground streams; they poured molten copper for the outer coffin; and they filled the burial chamber with models of palaces, towers, and official buildings, as well as fine utensils, precious stones and rarities. Artisans were ordered to fix automatic crossbows so that grave robbers would be slain. The waterways of the empire, the Yellow and the Yangtze rivers, and even the great ocean itself, were represented by mercury and were made to flow mechanically. Above, the heavenly constellations were depicted, while below lay a representation of the earth. Lamps using whale oil [Wood suggests the translation here should be "dugong oil"] were installed to burn for a long time.

The Second Emperor decreed that his father's childless concubines should follow him to the grave. After they were duly buried, an official suggested that the artisans responsible for the mechanical devices knew too much about hte tomb for safety. Therefore, once the First Emperor was placed in the burial chamber and the treasures were sealed up, the middle and outer gates were shut to imprison all who had worked on the tomb. No one came out. Trees and grass were then planted over the mausoleum to make it look like a hill. (Cotterell, p.17)

That represents the sum of our near-contemporary knowledge about the tomb – a good deal of any other evidence that may have survived was probably destroyed in the great rebellion of 204-206, which resulted in the establishment of the Han Dynasty, and almost certainly led to the re-opening and looting of the tomb itself. One reason why it has not been excavated is fear that opening it to the air could catastrophically degrade any surviving artefacts. However, ground scans have revealed the presence of large numbers of coins and also high levels of mercury, suggesting not only that something has survived, but that Sima Qian's fanciful-sounding descriptions may have some truth in them. (Wood pp.128-30; Chemistry World, 7 January 2015)

The location of the grave was never lost, and, over time, small discoveries were made in the vicinity that hinted at something more remarkable. For example, a clay model of a woman, possibly a servant, was uncovered nearby in 1932, and between then and 1974 a total of four more kneeling figures were uncovered in the vicinity, in no discernible pattern – another female attendant and three kneeling crossbowmen from a terracotta warriors burial pit. The crossbowmen, found later, went to museums; one of the attendants were taken to a local temple and venerated by the altar there.

Word of the initial discovery reached the noted scholar Zheng Zhenduo, who became Communist China's first Director of Administration of Cultural Heritage, and who in 1948 correctly speculated that the figures might be part of an imperial honour guard and that there were probably more to be found (Metropolitan Museum p.45; Clements pp.185-6) One of the female figures, a 70cm clay model of a seated woman was exhibited in London in 1973. (Wood p.131) There was sufficient interest in the tomb site, and awareness that it probably contained significant finds, for the Han Emperor Liu Bang to order, in 195 BCE, that "20 households" should move to the site and guard it – and for Mao to have signed a special protection order covering the area in 1961 (Clements p.180)

Other finds that took place around this time include several funerary buildings unearthed in 1977 during the construction of a road.

The terracotta army itself was first located by peasants digging a well in March 1974. This was a surprise; they were some way from Mount Li and, over time, the full scale of the tomb complex had been forgotten; there were no traditions that burial pits had been dug for the army itself, or that the complex extended (as it does) more than 4km from the First Emperor's tomb (Clements p.180). Before that date, there was nothing in existing traditions or old records to even hint at the existence of the terracotta warriors, though – as we have seen – a couple of well-informed archaeologists did have their suspicions.

Sources

Jonathan Clements, The First Emperor of China

Arthur Cotterell, The First Emperor of China

Metropolitan Museum of New York, Treasures from the Bronze Age of China

Frances Wood, The First Emperor of China