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Initially, the Ford Mustang was released in 1965 based on the compact Falcon (musclecarclub.com). This model Ford was created mainly to cut production costs. Ford wanted to produce a "pony car", also known as a "baby muscle car"(Wikepedia). It was a simple model, but offered many many options that Ford provided to the consumer in order to boost sales.
With record says of 22,000 on the first day, and over a million in its first two years, the Mustang quickly become not only a car but an icon of the American automobile industry (musclecarclub.com). According to musclecarclub.com, the Mustang is the only muscle car that still exists today.
For a thorough history of the Ford Mustang, check out http://www.edmunds.com/insideline/do/Features/articl eId=93320
Sources used:
http://en.wikipedia.org/wiki/Pony_car
http://www.musclecarclub.com/musclecars/ford-musta ng/ford-mustang-history-1.shtml
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Automotive history: Ford Mustang
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