The etymology of the word "tragedy" is "tragos" (goat) +"ode" (hymn, lamentation). Tragoi (the goats) were the priests of god Dionysus. During the festivities for the God, a goat was being sacrificed and the satyrs were singing the lamentation song for the sacrificed goat.The parts of an ancient play are : a) The epic, b) The lyric, c) The dancing. The formation of tragedy was the synthesis of the above elements. Epic and lyric poetry were developed in many nations across the ancient world.In Greece the epic poetry reached its peak with Homer (and his classic heroic works, Iliad and Odyssey) and Hesiod with his didactic work, Theogonia.As far as lyric is concerned there are four rhythms: a) elegiac in Ionian dialect, b) iambic in Ionian dialect, c) melic in aeolic dialect and d) choric in Dorian dialect.
A special kind of lyric poetry is choric poetry. A kind of choric poetry is Dithyramb.Dithyramb is an hymn to god Dionysus, a choric song accompanied by flute. The worship of Dionysus was characterized by many eastern elements and influences from Thrace. As the religion was descending South, some elements of mysticism and orphism are being observed in it.As part of the choric poetry Dithyramb had a chorus. The members of the chorus were disguised in animals (goats) and they were called Satyrs. The Satyrs were daemons of the woods and at first they had no relation to Dionysus. But as his religion was expanding in the South of Greece, they attached to him. It is most possible that this meeting of the northern Dionysian religion with the Arcadian Satyrs took place in Peloponnesus.
At the beginning, the worship of Dionysus must have been quite simple. According to Plutarch (Moralia, 257), dithyramb consisted of songs, with lyrics drown from Dionysus life and his adventures. Some of them were sad, symbolizing the suffering of God (sung during Lenea, in January, when the nature mourns) and others funny, symbolizing the joy of God (sung during the Great Dionysia, in March, with the revival of the nature). His followers, formed a parade : a satyr holding a urn full of wine and some branches of wine tree was leading, followed by a satyr carrying a goat, then by a satyr carrying figs and at last by a satyr holding a phallus. (All the above mentioned were symbols of Dionysus.) Behind them followed the people singing the dithyramb. The parade ended in a circular threshing floor (precedent of the orchestra), where the goat was sacrificed (Even in the later centuries, in the middle of the orchestra one could find an altar - "thymeli").
At the end of the 7th century BC, Arion from Methemna introduced in Corinth a more sophisticated form of dithyramb by separating one satyr from the chorus (consisted of 50 men). This leading satyr ("coryphaeus") was reciting stories related to Dionysus. The dialect was the Doric, since Arion acted in Corinth (a Doric city).Across the centuries the poets were composing each year dithyrambs for the Dionysian worship. In Athens, in the middle of 6th century BC Thespis, had the inspiration to insert into dithyramb some verses in another meter, without melody, suitable for recitation and a leading actor to recite them. Thus the leading actor (the hypocrite) was replying to the chorus and the plot was continuing. (The word "hypocrite" derives from the verb "apocrinomai", which in Greek means "to reply". In other words the hypocrite, the leading actor, was someone who was replying to the chorus.) The verse written for recitation have been written in attic dialect.In that way the lyric and epic elements came together with the dancing movements of the chorus and ancient drama got born in the form of tragedy (solemn dithyramb), comedy and satiric drama (scoptic dithyramb).