They were the founders of visual effects and still are the leading company in developing new software and improving the old software. They used matt paintings on glass and then composite film footage over the top, miniature models on blue screen, complex masks and costumes and optical compositing when they first started out making the first Star Wars.
They then led onto creating the Dyxtraflex computer allowing dynamic and repeatable camera moves, they developed computer graphics, made the first computer animation of the hand moving and first computer environment using Mac's software, they made the stained glass man character in the Young Sherlock Holmes in 1985 (was a lot of work as they didn't have the tools to do such things then) which was the first animated character ever made, they made the first morphing shot in the film Willow, the first digital editing system, the first digital audio editing system, a film laser scanner, The Pixar computer with a powerful graphics computer for digital compositing and RenderMan their software and they created the first digitally animated film. Phew!
After all of these massive advancements in technology, equipment and software the company split, which the other half then became the first 3D animation company Pixar. Lucas film then set up their own CG group which was to develop the medium but only for films, which led to them creating the film Abyss.
They carried on to break new ground always staying innovative and forward thinking. Jurassic Park was the biggest turning point for showing the possibilities of CG, whereas Forest Gump did the same but for understated hidden effects. During this time people felt threatened by the digital shift, and referred to it as 'the dark side' where they lost a lot of their employees due to reluctancy to change their way of working.
Their most recent developments is the creation of their own particle system and way to render that, mastering photorealistic modeling and effects using both hard surface with organic and advancing their mocap technology when filming the Pirates of the Caribbean franchise.
Below is a fantastic VFX breakdown of their blockbuster film The Avengers.
http://www.ilm.com/
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