White chocolate first appeared in Switzerland in the 1930s. It was invented by Henri Nestlé when he experimented on how to best use excess cocoa butter.
It's composed of cocoa butter, milk, and sugar, but no cocoa liquor or cocoa solids. So, why is it even called "chocolate"? Because of its main ingredient, cocoa butter--a product of the cacao plant.
Traditionally, the US Food and Drug Administration held that to be called 'chocolate' a product must contain cocoa liquor.
But, in 2004, the FDA finally adopted regulations that define what may be marketed as "white chocolate":
It must be at least 20% cocoa butter (by weight), at least 14% total milk solids, at least 3.5% milk fat, and less than 55% sugar or other sweeteners.
Make sure when buying this chocolate that it doesn't contain a fat substitute. Lower grades use vegetable fat in place of the cocoa butter.
These lesser quality types, also known as "confectioner's coating" or "summer coating" don't contain anything related to cocoa!
The best kinds are made with whole milk powder and some vanilla.
The first indication of the quality of this type of chocolate is its color. A high grade "white", made with good ingredients, will have a cream to ivory color, while cheaper versions made with substitute fats will be truly white. And low grade varieties will lack a rich and creamy flavor.
It's often paired with other types of chocolate thanks to its complementary creamy color and mellow flavor. So, any reputable confectioner will avoid the cheap imitations.