-- GeraldoXexeoCompare with NextBigThing
Originally, the cup used by Jesus Christ at the Last Supper, and also supposedly the cup used to catch his blood while he was on the cross. In medieval legend endowed with magical properties and the object of quests. Hence, any hotly desired but probably unobtainable thing.
Some explanation of the original HolyGrail legend would be in order. It is most often associated with either King Arthur, or MontyPython.
In the common legend, grail = cup/goblet/chalice used by Christ at the Last Supper, from "sangreal" or "san greal" although there are other interpretations of sangreal = "sang real" which translates as "royal blood" and here the story experiences a fork in the VersionControl. The most common interpretation is that of a "holy object" (cup used by Christ) worthy of being sought over spans of time and vast distances. Hence its use as a goal metaphor.
This "Grail as goal" usage most likely dates from the Arthurian legends, where the Knights of the Round Table sought the Grail as the most holy lost object of Christendom. NB that only one of them found it (Galahad, in the British versions), and most of the seekers came to bad ends.
It is also important that the HolyGrail may not exist at all in reality. One can't disprove that it exists, so the search always continues.
Well, if you believe that Jesus was at the very least a human who died on the cross (I can believe that much without getting into religion) then the grail must have existed at some point. Whether it still exists--or just shards of it, like the spear of destiny--is debatable. It's at least as likely as the Ark of the Covenant, Moses's staff, the Mormon's gilded writings, Scientology's anti-thetan device, or campaign reform.
Obligatory reference to Monty Python and the Holy Grail: Brother Maynard, fetch the HolyHandGrenade!
See also: SilverBullet, NoSilverBullet