The letters on Linotype keyboards were arranged by letter frequency, so ETAOIN SHRDLU were the first two vertical columns on the left side of the keyboard. Linotype operators who had made a typing error could not easily go back to delete it, and had to finish the line before they could eject the slug and re-key a new one. Since the line with the error would be discarded and hence its contents did not matter, the quickest way to finish the line was to run a finger down the keys, creating this nonsense phrase.
If the slug with the error made it as far as the compositors, the distinctive set of letters served to quickly identify it for removal. Occasionally, however, the phrase would be overlooked and be printed erroneously. This happened often enough for ETAOIN SHRDLU to be listed in the Oxford English Dictionary and in the Random House Webster's Unabridged Dictionary.