When one attempts to find out the authorial intent in the text or trying to understand the character, one is, in one way or other, entering into the domain of psychology and such attempts to read literature have been done since the time of classical criticism. However, tools of psychology to analyze the text have developed in twentiethcentury with, significantly, Freud.
Much of the emphasis of psychoanalytical criticism is to read, in literature, sexuality and three major elements of literary discourse: the writer, the characters and the reader. Also, psychoanalytical criticism deals with different levels of consciousness: unconsciousness and sub-consciousness literary text.
Unconscious has been held at a primary level in psychoanalytical criticism. For The Unconscious being radically new discovery, it gathered the attention from everywhere. Before this discovery, mind was understood as being a linear, straight, one-dimensional object.
With Freud, mind became a more critical discourse that changed the way various disciplines worked including science and humanities. Basically and initially, the psychoanalytical criticism concerned itself with sexuality and its connection various happening in the body and mind; however, with time it has moved beyond that.
It has been believed that reality lies at the unconscious level and that consciousness acts as a filter which segregates the thoughts which are suppresses and exposed in public. Many a time, suppressed thoughts take help of fantastic elements and comes out in dreams.
Related to this thought, literature was considered to be fantasy which is a product of suppressed thought coming out on paper in form of fiction just as it happens in dreams.
So, through the analysis of the fiction, psychoanalytical critics try to find out the thoughts buried in the unconscious of the writer, particularly in relation to sexuality. However, such practices were later critiqued and challenged by theorists like Jacques Lacan and Carl Jung.
Psychoanalytical criticism, apart from being a separate theory, has also been used by various other theories such as Marxism, Postcolonialism, etc. and have also given birth to new school of thoughts like Feminist psychoanalytical theory. Though it begins with Freud, as an official discipline, but later other theorists took his project further and also various other theorists broke away with him and beget their own psychoanalytical theories.