The ball and dummy drill has been around a very long time, so attribution is going to be impossible.  The drill is designed to expose failure to follow some of the most important fundamentals of marksmanship; trigger control and follow through.

This drill is best practiced with a partner who you're comfortable shooting with.  The setup is relatively easy but you will need dummy rounds.  Have you partner load your magazine with five rounds, four live ones and one dummy.  Have them observe you throughout the course of fire.  Each shoot should be as focused as possible on form and fundamentals of shooting the shot.  When the dummy round cycles into battery, you should be totally surprised.  When the firearm goes "click" instead of bang, the front sight should not move.  If you keep a stable position, don't exhibit any recoil anticipation, and maintain a smooth trigger pull, you've successfully completed the drill and you can switch positions with your partner.  If the front sight moved due to anticipation of recoil or poor trigger pull, your partner should call you out on it and be as verbally abusive as you're comfortable with.  Remediation is to dry fire five times perfectly in a row, and then another magazine with live and dummy ammo.  If you don't have a partner to berate you for your poor performance be as conscious of your shot and don't be easy on yourself.  If the front sight moved, make yourself do remediation.  Depending on how much time and how bad you are, try to complete at least 50 rounds per session (10 cycles).  This training is effective for pistol, rifle, and shotgun, but especially pistol.  Training with a partner who can really rag on you (and you him) is especially beneficial because it introduces a critical observer and also introduces a bit of friendly competition.

A variation of the ball and dummy drill is the immediate action dummy drill.  Here, the purpose of the exercise is not accuracy and marksmanship, but training for proper corrective action for a malfunction.  Instead of watching for front sight movement, your partner should be observing for proper reaction and fluid movement.  The setup is the same; four live round and one dummy, loaded so that the order is a surprise.  When the hammer drops on a dummy, the appropriate corrective action for your firearm should be performed in a timely manner([url=http://en.wikipedia.org/wiki/Tap_Rack_Bang]"tap, rack, bang"[/url], [url=http://en.wikipedia.org/wiki/M16_rifle#Operation]"SPORTS"[/url], etc).  Observer should call out any hesitation or fumbling.  There is no remediation but more practice.

-Smashy