Common folklore has it that the G&T was created by Brits stationed in
India; folks drinking
tonic water found the stuff unpleasant tasting so
gin was added to make it more palatable. Sounds backwards to me, but I've never been a big fan of the stuff (note 25 Mar 04: I love gin, now).
Tonic water today, however, is much different than the tonic water one would drink for symptomatic malaria treatmeant. Modern tonic water contains less than 20 milligrams of quinine per six ounces (source: the Straight Dope) and effective malaria treatment today usually consists of half a gram or a gram of quinine (taken in tablets over the course of the day. As quinine is quite bitter, it's a little more understandable why one would be inclined to try to kill the taste somewhat.