Though often confused with the Rod of Aesculapius, the symbol of medicine, the caduceus is actually the symbol of the Roman god Mercury. Sometimes called the wand or staff of Hermes, the Greek name for Mercury, the caduceus represents Mercury's power over messengers and commerce as well as his darker reputation as the god of thieves, gamblers, confidence men, and the transporter of the dead.
According to folklore Mercury came upon two serpents fighting, and shoved his rod between them to break up the combat, it was through this action that the two serpents became transfixed to his staff. This is often presented as a parable of peace. It should be noted that this story seems to have some heavy sexual overtones, and may perhaps be yet another example of Mercury's dualistic nature; both as a deity associated with sexual activity almost as much as Venus, and as a contrast to his position as a guide for the dead. Taking aside the obvious phallic associations of staffs and snakes, mating snakes often appear to be fighting to those unfamiliar with serpents. So it could be a bit of humor on thew part of the ancient Greek writers that we have misinterpreted through the lens of modern culture.
There is a much earlier story that tends to support this, it concerns a rather unfortunate individual by the name of Tiresias. He came upon two serpents “fighting” as well, except he went to strike them down with his staff and killed the female while she was mating. Hera, being the lovely goddess she was, changed him into a woman. He went on to live as a woman for seven years, including having children and, according to some accounts, becoming a quite popular lady of negotiable virtue. Eventually she came upon another pair of snakes, struck the male down and regained his masculinity. Later, it was this staff that was presented Mercury when he earned his position as the messenger of the gods. It is not difficult to see how the this story told over a span of centuries could morph into the prior tale.
The modern day association of Caduceus with medicine was formed in the mid eighteenth century with the United States Army, where it was incorporated into the badges of certain medical personal. By the early 19th century it had been added to the uniforms of medical officers as well. In an ironic twist that would make the god of merchants and thieves himself smile, the Caduceus has come to be the symbol of choice in most major medical corporations in the United States, where the private practitioners and other medical professionals around the world still use the traditional rod of Aesculapius.