Mod_python originates from a project called Httpdapy (1997). For a long time Httpdapy was not called mod_python because Httpdapy was not meant to be Apache-specific. Httpdapy was designed to be cross-platform and in fact was initially written for the Netscape server (back then it was called Nsapy (1997).
This excerpt from the Httpdapy README file describes well the challenges and the solution provided by embedding Python within the HTTP server:
While developing my first WWW applications a few years back, I found that using CGI for programs that need to connect to relational databases (commercial or not) is too slow because every hit requires loading of the interpreter executable which can be megabytes in size, any database libraries that can themselves be pretty big, plus, the database connection/authentication process carries a very significant overhead because it involves things like DNS resolutions, encryption, memory allocation, etc.. Under pressure to speed up the application, I nearly gave up the idea of using Python for the project and started researching other tools that claimed to specialize in www database integration. I did not have any faith in MS's ASP; was quite frustrated by Netscape LiveWire's slow performance and bugginess; Cold Fusion seemed promising, but I soon learned that writing in html-like tags makes programs as readable as assembly. Same is true for PHP. Besides, I *really* wanted to write things in Python. Around the same time the Internet Programming With Python book came out and the chapter describing how to embed Python within Netscape server immediately caught my attention. I used the example in my project, and developed an improved version of what I later called Nsapy that compiled on both Windows NT and Solaris. Although Nsapy only worked with Netscape servers, it was a very intelligent generic OO design that, in the spirit of Python, that lent itself for easy portability to other web servers. Incidently, the popularity of Netscape's servers was taking a turn south, and so I set out to port Nsapy to other servers starting with the most popular one, Apache. And so from Nsapy was born Httpdapy.
...continuing this saga, yours truly later learned that writing Httpdapy for every server is a task a little bigger and less interesting than I originally imagined.
Instead, it seemed like providing a Python counterpart to the popular Perl Apache extension mod_perl that would give Python users the same (or better) capability would be a much more exciting thing to do.
And so it was done. The first release of mod_python happened in May of 2000.