Basically, with the invention of sets and modern algebra it was discovered that one can not only add, subtract, multiply and divide things of an algebraic gadget like a group or a ring. But you can also do these things at the level of an algebraic gadget. For example, you can multiply two groups together or add two rings together.
However, whilst there was a profusion of new ways of adding and multiplying and there was a family resemblence between these constructions there were enough differences that a systematic method of saying what it means to add two objects together and how to multiply two things together in a systematic fashion was lacking.
Well, this was the case until category theory appeared. Then it was understood that addition, called here the coproduct, was dual to multiplication, called here the product. And this was systematic in all categories. Moreover, the product was an example of a limit and the coproduct, an example of a colimit.
It turns out that the direct sum and direct product for vector spaces are isomorphic (ie the same) for finite-dimensional vector spaces but differ for infinite-dimensional spaces. Hence, their differences, at tge finite-dimensional level is not apparent. In infinite dimensions, it is the direct sum that is the coproduct whilst the direct product is the product. Its probably worth adding that the tensor product of algebras, a vector space equipped with a notion of multiplication, is the coproduct in the category of algebras which shows that coproducts can be quite different to what one might imagine them to be.
Since Peano gave the first formal description of vectors in 1888, the notion of a direct sum and product of vector spaces will have to be after this. Its worth noting that Peano axioms were inspired by Grassmann's invention of the exterior algebra, his Die Lineale Ausdehnungslehre first published in 1844.