The first chrism was made by the prophet and Law giver, Moses, according to directions given him by God, and used by him to consecrate the Tabernacle and anoint Aaron for the service of the High Priest. All subsequent prophets, high priests and kings over Israel were likewise chrismated, as was anything or anyone reserved exclusively to the service of God or to a life of holiness. We find in the Old Testament scriptures many references to this special rite: "I have found David My servant, with My holy oil have I anointed him" (Ps. 88:19); "Touch not Mine anointed ones" (Ps. 10l:15).
The word "chrism" or "anointment" is also directly related to "Christ" as "the Anointed One" (Ps. 2:2; John 2:41). It is in Christ that the first anointing given under the old Law was fulfilled: "God anointed Jesus of Nazareth with the holy Spirit" (Acts 10:38).
During the early years of Christianity, the transmission of the gifts of the Holy Spirit to the baptized were given by the Apostles through the laying of hands. "Now when the Apostles at Jerusalem heard that Samaria had received the word of God, they sent to them Peter and John, who came down and prayed for them that they might receive the Holy Spirit, for it had not yet fallen on any of them, but they had only been baptized in the name of the Lord Jesus. Then they laid their hands upon them and they received the Holy Spirit" (Acts 8:14-17). However, as the Church spread throughout the world and the number of the baptized was greatly increased, it was not possible to continue the practice of Samaria. Consequently, the Apostles introduced the use of the sanctified Chrism. The Holy Chrism was sanctified by the Apostles and was continued thereafter by the bishops through the Apostolic Succession. The laying on of hands was replaced by the use of Holy Chrism to transmit gifts of the Holy Spirit to those who are baptized.
As followers of Christ, we receive anointing in token of our true adoption as sons of God; through Chrismation we become Christians, "anointed ones". This is prefigured in the Old Testament; as Moses consecrated the Tabernacle wherein the tablets of the old Law were kept, so also all Orthodox Christians, tabernacles of the new Law, are anointed and sanctified in order to make them fit dwellings of God.
Holy Chrism is also used to consecrate churches.
"The Lord said to Moses, 'Take the finest spices -- 12 pounds of liquid myrrh, 6 pounds of sweet-smelling cinnamon, 6 pounds of sweet cane, and 12 pounds of cassia (all weighted according to official standard). Add one gallon of olive oil, and make a sacred anointing oil, mixed like perfume.''' (Exodus 30:22-25)
Holy Chrism is prepared chiefly from olive oil, but includes white grape wine and a great number and variety of incenses and other aromatic substances (57 different elements), which symbolize the variety of gifts of the Holy Spirit that the chrismated Christian receives. (St. Dionysius the Areopagite, in his Ecclesiastical Hierarchy, elaborates on the mystical significance of the large number of ingredients used.) The most ancient list of materials used for the preparation and making of the Holy Chrism--which is still used today--dates from the eighth century A.D. The care and purity with which Holy Chrism has been prepared since Apostolic times, is the marker the reverence and awe we should feel for this Mystery.
By Tradition, Holy Chrism is only made during Great Week, and is usually prepared and kept in a patriarchal or monastery cathedral. A firm tradition also exists in the Church from the earliest times in which the Holy Chrism was sanctified only by the Apostles and their successors, the bishops, and not by the presbyters (priests). Canonically, permission to sanctify the Holy Chrism is restricted even further.
The oldest reference to the rite of sanctificaton is in The Apostolic Tradition of Hippolytos. Later, directions concerning the sanctification of the Holy Chrism were included in the Great Prayer Book (Mega Euchologion) and Goar's Euchologion. The sanctification of the Holy Chrism takes place in the following order:
1. After the doxology on Palm Sunday, a blessing is usually bestowed on those who will be participating in the sanctification of the chrism.
2. On Holy Monday the Bishops and clergy gather in church and bless the water, the already-prepared ingredients, and the cauldron in which the Chrism will be "boiled" for the next three days. The bishops prepare the fire under the pot themselves, and having lit the fire with the flame from the trikiri, they begin to heat the mixture of olive oil and white wine. This is boiled until the morning of Holy Wednesday, and during this time members of the clergy keep a continuous vigil, reading aloud the Gospel of St. Matthew, while the chrism is stirred by deacons.
3. On Holy Wednesday the bishops bless the incenses again and these are poured into the boiling oil and wine; the chrism is kept over a flame until the evening. In the evening the clergy sing the Pentecost troparian, "Blessed are Thou, O Christ our God..." while the new Chrism is poured into containers and sealed in the presence of the hierarchs, to await its blessing during the Liturgy on Holy Thursday.
4. During the Divine Liturgy on Holy Thursday, at the appointed time after the exclamation: "And may the mercy of our Great Lord," and the call to "Let us attend," the congregation kneels, and the Patriarch sanctifies the Holy Chrism according to the rubrics. At the end of the Divine Liturgy, portions of the Chrism are then sent out to all the dioceses, and each priest is given some by his bishop.
(This material was adapted from http://www.goarch.org/en/ourfaith/articles/article8420.asp and http://www.roca.org/OA/56/56H.htm)