There was a Flight of the Conchords mention of Russian dolls. And so with it already in my head, I came across a page called History of Russian nesting dolls. The translation is rough and interesting, and here are a few quotes:
"In 1918 the unique Museum of Russian and Foreign Toys was opened in Sergiev Posad. The first Russian matryoshka by S. Maliutin is a part of its exhibition."
The life and death of nesting dolls: "Private making of matryoshkas and production of other hand crafted things was forbidden in the USSR – craftsmen had to work at the factories where was no possibility neither to earn enough money for their labor (rates were quite low as at other state enterprises) nor to show their art abilities (goods had to be simple enough for mass production)."
Now Semionovo matryoshka has not the best time. The complex economic situation in Russia mirrors at these crafts too: it's harder to buy raw materials, fuel and electricity became more expensive. In these condition it hard to create something new, people instead of wage in money get just ready goods: matryoshkas, wooden spoons, wooden tableware. It press people to leave a factory and to work separately at home. Maybe it is hard in the beginning but in such conditions can be born new ideas, types, goods - there are more to room for creative activity.
We sincerely hope that Semionovo matryoshka will blossom soon and will expose us new unusual things. (From Russian-crafts.com.)
I didn't know the Soviet Union forbade home crafts. Way to kill a culture.
Above, 1970's stop-action animation from Sesame Street.
Below, Flight of the Conchords use Russian Dolls in a philosophical analogy.
For sale on e-Bay 4/6:
Added July 2008:
Some images I had above, before, quit working, so I've brought a google link to more Nesting Dolls than you could ever look at. Some are pretty funny these days!
Russian Nesting Doll image search, Google