Scrapie is a spongiform encephalopathy, just like bovine spongifrom encephalopathy (mad cow disease) and Creutzfeldt-Jakob disease. The name comes from the common symptom of the animal scraping its body up against objects as if it itches, often pulling off hair/wool. Scrapie was first recorded in 1732 in Great Britain in sheep -- no one knows why it appeared there or then. It is most common in sheep and goats; however, it isn't limited to them; the first case in a cow was recorded in 1881 in France, and laboratories have managed to infect "hamsters, mice, rats, voles, gerbils, mink, cattle, and some species of monkeys." In fact, one experiment found that when houseflies ate the brains of dead scrapie-infected hamsters, the larvae of those flies could infect previously-healthy hamsters when the larvae were eaten along with hamster food.

The most common transmission of the disease is from ewe to baby lamb (apparently the ram that fathers the lamb cannot transmit the disease). Some scientists say that transmission is through the placenta/placental fluids; others that it is inherited via prion proteins. It can, however, be transmitted from sheep to goats on the same farm, which seems to make the inheritance theory difficult to support. Scientists now hypothesize that prions are the agent of transmission in all of these diseases, since it's been known for decades that the diseases can still be transmitted after a dose of radiation that would kill bacteria or viruses.

In 1959, the similarity was noted between scrapie and kuru, the brain disease found in New Guinea, and the resemblance of both to CJD. BSE is now widely thought to have originated from scrapie-infected sheep carcasses being rendered as part of cattle feed; CJDinsight.com says that around 1980 changes in the rendering process were made that might have started allowing the transmission agent to survive.

Scrapie is not common (the U.S. reports at most a few dozen cases a year) but it has been found in many areas; it has been present in the U.S. since 1947. The methods of preventing the disease are basically to buy sheep from Certified Scrapie Free sources (or places such as Australia and New Zealand, which the U.S. recognizes as completely scrapie-free). Since 1998, a test has been available that takes cells from the living sheep's eyelids to look for scrapie; before that it could only be found by autopsy, since there are a few other diseases that produce similar symptoms, and an infected animal may not show symptoms for years.

Sources:
Carlson, Laurie Wynn. Cattle: An Informal Social History. Chicago: Ivan R. Dee, 2001.
http://www.aphis.usda.gov/oa/pubs/fsscrapie.html
http://www.cvmbs.colostate.edu/dlab/webdocs/ext_vet/cleon6.html
http://www.cjdinsight.org/history.html
http://bmj.com/collections/bse/lacey.htm
http://www.newswise.com/articles/1998/4/SCRAPIE.WSU.html
http://www.ars.usda.gov/is/AR/archive/nov98/test1198.htm