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As to Who came up with the karat (or carat) system or exactly When, I fear this is lost in the murky past.  However, as to Where, I can point you in the right direction. I fear my ancient history is lacking so I can only tell you this was already going on MORE than 3000 years ago.  (There are spectacular ruined cities in the Indian jungles that are older than that...but I digress)  But anyway, when I say the When and Who are lost in the murky past I mean the Ancient Past.

While Western Europeans were still drawing on animal skins with burnt sticks the Persians and Chinese and other parts of the Asian, Indo-European and Near Eastern world had already adopted standardized measurement. When it came to precious metals and gems, the standard had to be small and reliable. 
Carob seeds became the standard, and one standard unit of gold was 24 of the carob seeds. The word karat (and carat, the unit of weight used to measure gems) derives from the; Italian "carato", the Arab "qirat", or the Greek "keration", all meaning the fruit of the carob tree.


Now, we all agree that 24 karat is pure gold, or 24 parts gold.  So 18K is 18/24 gold and 14K is 14/24 parts gold.  Incidentally 10K is the lowest that can be sold as "gold" in the US, though things can also be "gold plated" or even "electroplated"  (more chem... ).  Some countries set the threshold higher (14K or 18K) and a few as low as 8K or 9K.

So what are the other parts?

Well it depends on what one wants.  You can make different color alloys;

Yellow gold - usually copper and zinc alloy
Red or Rose gold - more copper and less zinc
White gold  - this one has many ingredients and can therefore vary widely in price, quality and durability.  First, please nothe that sometimes Pt (platinum) is called "while gold."  However gold in a white alloy is mixed with a variety of things including: zinc, copper (far less than in yellow or red gold), nickel and/or platinum.
Green gold - copper and silver
Blue gold - iron

The metric craze has also hit the world of fine jewelry, so many European markets prefer to work using a "fineness" scale based on a) a decimal version of the karat component and b) parts of 1000.

24K gold or 100% gold has a fineness of 999
18K gold or  75% gold has a fineness of 750 and
14K gold or 58.3% gold has a fineness of 585
and so on..