A cottage industry is an industry – primarily manufacturing – which includes many producers, working from their homes, typically part time. The term originally referred to homeworkers who were engaged in a task such as sewing or lace-making. Some industries which are usually operated from large centralized factories were cottage industries before the Industrial Revolution. The business operators would travel around, buying raw materials, delivering it to people who would work on them, and then collecting the finished goods to sell, or typically to ship to another market. One of the factors which allowed the industrial revolution to take place in Western Europe was the presence of these business people who had the ability to expand the scale of their operations. Cottage industries were very common in the time when a large proportion of the population was engaged in agriculture, because the farmers (and their families) often had both the time and the desire to earn additional income during the part of the year (Winter) when there was little farming work to do.
The use of the term has expanded, and is used to refer to any event which allows a large number of people to work part time. For example, eBay is said to have spawned a cottage industry of people who buy surplus merchandise, and sell it on their auction system.