From and earlier answer of mine:

Armies have been using fieldworks to protect themselves for centuries. The benefit of the trench is that it allows relatively quick movement while still concealing much of the soldier's body from enemy fire, and limiting injury to attacks that come directly from above: the biggest cause of death in the First World War was artillery fire, from airbursting shrapnel shells that could rain fragmentation down into the trenches. This was why armies adopted steel helmets.

Most armies then and now accept that a pause of any length in an advance should be accompanied by digging in, first as shell scrapes, then as more developed trenches. The trenches of the First World War largely grew out of this: after the Germans were halted at the First Battle of the Marne in 1914, they withdrew to more defensible positions on high ground overlooking the River Aisne and dug in, where they received the British and French counteroffensive. After the Entente proved unable to break through German lines on the Aisne, they began a series of outflanking attempts to the north, which largely foundered against German defences, and which became known as the "Race to the Sea" after it ended at the First Battle of Ypres near the Belgian coast. The deep, elaborate trench systems of the First World War largely grew out of these first defences established in the summer and autumn of 1914.

As for how they became so deep and elaborate, work to improve the trenches was largely done at night. Corrugated iron was used to revet the trenches, while wiring parties were sent into No Man's Land under cover of darkness to establish barbed wire obstacles. These were initially strung onto wooden posts hammered into the ground, but as this tended to attract enemy fire, they were replaced by iron pickets that could be screwed silently into the ground.

As for whether there was mutual agreement between the two sides, I cannot speak for that. There were certainly periods throughout the war where soldiers in opposing trenches adopted a "live and let live" attitude towards each other, but whether this extended to ignoring wiring parties moving into No Man's Land I cannot say.

Sources:

Gordon Corrigan, Mud, Blood and Poppycock