This article is from the alt.usage.english FAQ, by Mark Israel email@example.com with numerous contributions by others.
This term for "a simple principle having wide application but not
intended to be strictly accurate" dates from 1692. A frequently
repeated story is that "rule of thumb" comes from an old law
regulating wife-beating: "if a stick were used, it should not be
thicker than a man's thumb." Jesse Sheidlower writes at
"It seems that in 1782 a well-respected English judge named Francis
Buller made a public statement that a man had the right to beat his
wife as long as the stick was no thicker than his thumb. There was
a public outcry, with satirical cartoons in newspapers, and the
story still appeared in biographies of Buller written almost a
century later. Several legal rulings and books in the late
eighteenth and nineteenth centuries mention the practice as
something some people believe is true. There are also earlier
precedents for the supposed right of a man to beat his wife.
"This 'rule' is probably not related to the phrase 'rule of
thumb', however. For one thing, the phrase is [...] attested
[earlier ...]. (Of course, it's possible that it was a well-known,
but unrecorded, practice before Buller.) Another problem is that
the phrase 'rule of thumb' is never found in connection with the
beating practice until the 1970s. Finally, there is no semantic
link [... from what was presumably a very specific distinction to
the current sense 'rough guideline']. The precise origin of 'rule
of thumb' is not certain, but it seems likely to refer to the thumb
as a rough measuring device ('rule' meaning 'ruler' rather than
'regulation'), which is a common practice. The linkage of the
phrase to the wife-beating rule appears to be based on a
misinterpretation of a 1976 National Organization of Women report,
which mentioned the phrase and the practice but did not imply a
connection. There is more information about this, with citations
from relevant sources, at the Urban Legends Archive."
Thumbs were used to measure *lots* of things (the first joint
was roughly one inch long before we started growing bigger, and
French "pouce" means both "inch" and "thumb"). The phrase may also
come from ancient brewmasters' dipping their thumb in the brew to
test the temperature of a batch; or from a guideline for tailors:
"Twice around the thumb is once around the wrist..."
For a definitive rule of thumb, see the paper "Thumb's rule
tested: Visual angle of thumb's width is about 2 deg." by Robert P.
O'Shea in "Perception", 20, 1991, pp. 415-418.