The term Pave is from the French word Pave (pah-vey), as in paving a street. The word was quite descriptive of the diamond setting style in which small diamonds are used to literally pave an area of a ring or other jewelry item.
The desired effect is to obtain an area that looks like it is paved with diamonds, with as little as possible metal showing.
I would guess that pave setting has been around for hundreds of years, maybe thousands. It is a very low-tech style of setting in which a goldsmith will drill or form holes into the selected area of a jewelry item (or possibly the entire item) and then place the corresponding size diamonds into the holes and then with another tool, form tiny beads (two or more) of metal from around the edge of the diamond and then carefully push these beads of metal over the edge of the diamond to hold the diamond in the hole.
While the setting method/style goes back to the earliest days of jewelry making and is therefore quite ancient, the finished product coming from the hands of a master setter can make for some of the most magnificently beautiful and unbelievably intricate designs.