IIRC The 3.7 Lion install is down from the 4.7 Snow Leopard install, which was the result of a crash diet that Leopard was put on, I believe, bringing it down from around 7GB originally.

Apple's been squeezing out the bloat for several years, I believe, with the intention of doing digital downloads of OS in the future.

This implies the Mac App Store has been in the planning stages since around 2007-2008 or so (when Snow Leopard development likely started.)