It's an offshoot of military communication protocols, the military being the first institution to adopt large scale use of two-way voice radio. It became obvious early on with carbon microphones, static and audio distortion that a way needed to be found to make letters easier to discern, so two or three syllable words that were phonetically discernable and unique, even when garbled or buried in static, were adopted that could be linked to the applicable letter of the alphabet via that word's first letter.
It's evolved over time to the current Alpha Bravo Charlie standard in aviation, largely the result of an ICAO standardization project implemented after WW2 (during WW2, the US Army used a different phonetic alphabet, starting with Able, Baker, etc).
Other institutions use other variations on the same concept, such as the use of first names to represent letters in policing radio comms.
With numbers, it's mainly a practice of exaggerating the pronunciation of numbers, except for the number nine, which is impossible to discern from the number five if the audio is bad, hence "niner".
In Europe and North America at least, the audio quality of ATC comms has become good enough that you could get away without the phonetic alphabet much of the time, and you often hear 9 just said as "nine" not "niner", but comms audio in other places may not be as good, or you may be talking on HF, which is like ordering a burger at a drive thru. Add to that that need to mitigate workload/fatigue related errors even with good audio, so the protocols are still necessary.
So to answer Question 2, the ICAO phonetic alphabet is the result of a lot of research and evolution over the years to find the ideal phonetic alphabet that is efficient, pronunciation wise, and effective at the same time.