While no one know exactly when and where Red Velvet Cake originated, a story

(and a recipe) began circulating around the United States in the 1920s about a
cake that supposedly was served at the restaurant in New Yorks WaldorfAstoria Hotel. Heres an account of this urban legend as it appeared in Jan
Brunvands book, The Vanishing Hitchhiker (W.W. Norton, 1989):
Our friend, Dean Blair, got on a bus in San Jose one morning and shortly after,
a lady got on the bus and started passing out these 3 x 5 cards with the recipe
for Red Velvet Cake. She said she had recently been in New York and had
dinner at the Waldorf-Astoria and had this cake. After she returned to San Jose,
she wrote to the hotel asking for the name of the chef who had originated the
cake, and if she could have the recipe.
Subsequently she received the recipe in the mail along with a bill for something
like $350 from the chef. She took the matter to her attorney, and he advised her
that she would have to pay it because she had not inquired beforehand if there
would be a charge for the service, and if so, how much it would be.
Consequently, she apparently thought this would be a good way to get even
with the chef.
Because of this story, and similar variations, Red Velvet Cake is also known as
Waldorf-Astoria Cake, $100 Cake, $200 Cake, etc.
Theres also a scientific myth associated with Red Velvet Cake. It has
sometimes been asserted that the cakes red color comes from a chemical
reaction between the baking soda and the chocolate in the recipe. This is the
result of a simple misunderstanding of the chemistry involved. While cocoa
powder contains anthocyanins (red vegetable pigments) they are only red in the
presence of acids they turn blue-green in the presence of bases. When cocoa
is mixed with the baking soda, a base, the combination should turn the cake an
unappetizing brownish-gray. It doesnt, of course, because the anthocyanins are
present in very small quantities, and any color shift is masked by the more
prominent brown of the chocolate. The red color of the cake comes from a
much simpler source: large amounts red food coloring.
The supposed red color resulting from the baking soda/cocoa combination also
appears in connection with Devils Food Cake. I wonder if Red Velvet Cake was
created because Devils Food Cake doesnt look nearly as red as its name
would suggest. This is akin to some folks adding green food coloring to Key
Lime Pie because it doesnt appear limey enough.