First, we should clear up some confusion: the term ‘ammonite’ applies only to most Mesozoic forms. By contrast, ammonoids — a subclass which contains the ammonites — originated over 400 million years ago in the Early Devonian and vanished along with most dinosaurs after 335 million years of existence. So the question should really be, ‘What is an ammonoid?’
Simply put, ammonoids are relatives of squid, but without the ink sacs. They had a shell with gas-filled chambers which enabled them to float and swim efficiently with little effort. While ammonoids do not appear in the fossil record until the Early Devonian, the evolutionary lineage that lead to them can be traced back via the bactritids to the orthocerids — a highly successful group of cephalopods with straight conical shells. They had dome-shaped chambers connected by a tube called the siphuncle through their centres. The shape of septa changed as the cross section and coiling of the shell was modified through evolution. Firstly, the shell cross section changed from circular to oval, causing the suture lines (where the septum is attached to the shell wall) to become slightly vaulted. Secondly, the siphuncle slowly changed from a central to a ventral position, thus giving rise to the group we call the Bactritida. The Bactritida are poorly known, but phylogenetically important, because they gave rise to all living squid, octopuses, and the extinct ammonoids. Thirdly, how did an ammonoid evolve from a bactritid? The change was possibly driven by the dorsoventral asymmetry with the shifted siphuncle — some bactritids began building slightly coiled shells. That’s when some conjecture comes in, because the classification of ammonoid is given when the shell forms at least one whorl. This is a bit arbitrary, but at least it’s a definition.
A whole series of evolutionary changes occurred around the origin of ammonoids. Many of these changes are linked with increased coiling. Perhaps most importantly, the aperture moved more and more upward with tighter coiling of the shell, to a point where the aperture wound up slightly higher than the centre of mass of the animal. This enabled the animal to swim reasonably fast, much faster than their bactritid ancestors. The increase in horizontal swimming speed was of utmost importance; it helped the ammonoids catch prey and evade the increasingly mobile forms of jawed fish, which evolved in the Late Silurian and Early Devonian; some of them were certainly hunting cephalopods. Possibly, the selective pressure of the increase in mobility of predatory fish accelerated the evolution of more tightly coiled shells and thus the embryonic shell became smaller, from around 1 cm to about 1 mm in diameter. Simultaneously, the adult body chamber volume increased from circa 10 to 10 000 cm3. Presuming that the reproductive organs changed in the same proportion, we can estimate that the number of eggs produced by one female rose from approximately 200 in an early ammonoid to 200 000 in Late Devonian forms. This high number is comparable to reproductive rates of some modern pelagic squid, underlining similarities in their ecology and evolutionary origin. The small size of eggs and hatchlings appears to explain their susceptibility to environmental change. Accordingly, they became nearly extinct several times, but they also diversified rapidly, perhaps due to their swimming abilities. Finally, the increase in coiling (with eventual whorl overlap), the reduction of embryonic shell size, and the increase in the number of septa (chamber walls) until adulthood, caused the septa to become much more complexly folded.
And why are ammonoids so important today? In contrast to the pearly Nautilus, ammonoids had a greater number but much smaller eggs. Thus, the small hatchlings were more sensitive to ecological changes. As a result, entire clades of ammonoids vanished and were replaced rapidly by others. These spread quickly over vast regions, making them the icon of index fossils.