The pfSense project was started in September 2004 by Chris Buechler and Scott Ullrich. Chris is a long time contributor to the m0n0wall project. m0n0wall is a great embedded firewall, but one of the great things about its design is also a limitation to expandability. m0n0wall runs entirely from RAM, the entire OS and all applications are loaded into RAM at boot time. This is a great design for embedded systems, for performance and reliability reasons. However m0n0wall is not capable of being installed into a normal file system on a hard drive. Hence many desirable functions can't be reasonably implemented.

See this blog post for background on the name pfSense.