The concept for Tails was founded during the development of Sonic the Hedgehog 2. After some discussion about making a sequel to Sonic the Hedgehog (1991), portions of Sonic Team went to work with Sega of America's Sega Technical Institute. A new element they wanted to introduce was a new character that would both serve as a sidekick to Sonic the Hedgehog and draw attention and new players to the franchise.
An internal contest was held at STI which Yasushi Yamaguchi, originally the main artist and zone designer for Sega's Sonic Team, won. Yamaguchi originally created Ray the Squirrel (who would only appear in SegaSonicArcade) to be used as a sidekick, but designed Tails for the internal competition after Sega of Japan rejected the Flying Squirrel idea. The character was meant to hold a "deep admiration for Sonic."
The name 'Miles Prower' played on a speed pun (miles per hour) and was originally intended to be a tanuki, a raccoon-like canine native to east Asia, and extremely popular in Japanese folklore. The designers decided to change him to a fox, however, to avoid possible comparisons with Mario, who at the time had a power up called the Tanooki Suit, which allowed him to fly, and made him look like a tanuki. His entry won, but Sonic Team decided to change his character's name from "Miles" to "Tails" in which Yamaguchi was not too pleased at all about. Yamaguchi ended up with a compromise: he put the name "Miles" in as his legal name; "Tails" would be his nickname, ending up with the full name of Miles "Tails" Prower.
The character debuted as Sonic's tag-along partner in the franchise's second game, and has remained an important character. However Tails' uniqueness was not established until Sonic the Hedgehog 3 when players were allowed to control his flying.
Tails was redesigned (along with all of the other Sonic characters) by Yuji Uekawa for Sonic Adventure. Tails' redesign saw him having his fur color changed to a slightly orange shade of yellow, and he gained visible blue irises. He also became slightly slimmer and taller. He also gained a more streamlined appearance with slightly more rounded ears as well as longer tails, which are used as his main form of attack, most notably the Tail Swipe.