(copied from Numista.com)
When the Mint started using mint marks (letters) in the early 1800's to identify the various branch mints at which coins were being struck, the mint mark was hand punched into the working dies that would be striking the coins. A die maker would take a thin steel rod (punch) that had the mint mark engraved on one end and hold it in place on the working die where the mint mark was to be applied. Using a mallet he tapped an impression of the mint mark into the die. In most cases it was necessary to strike the punch more than once with the mallet in order to leave a satisfactory impression of the mint mark in the die.
1989 was the last year of the hand-punched mint-marks on US coins. Hand punching of mintmarks on proof dies ended in 1985. After that they started phasing them out on the business strike coins/denominations. They were completely switched over by 1990 and the cents were the last denomination to have punched mintmarks.