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This text from Wikipedia:
During World War II he worked at the Fore River Shipyard in Quincy, Massachusetts, where he claimed to have used the phrase to mark rivets he had checked. The builders, whose rivets J.J. Kilroy was counting, were paid depending on the number of rivets they put in. A riveter would make a chalk mark at the end of his or her shift to show where they had left off and the next riveter had started. Unscrupulous riveters discovered that, if they started work before the inspector arrived, they could receive extra pay by erasing the previous worker's chalk mark and chalking a mark farther back on the same seam, giving themselves credit for some of the previous riveter's work. J.J. Kilroy stopped this practice by writing "Kilroy was here" at the site of each chalk mark. At the time, ships were being sent out before they had been painted, so when sealed areas were opened for maintenance, soldiers found an unexplained name scrawled. Thousands of servicemen may have potentially seen his slogan on the outgoing ships and Kilroy's apparent omnipresence and inscrutability sparked a legend. The slogan began to be regarded as proof that a ship had been checked well, and as a kind of protective talisman. Afterwards, servicemen began placing the slogan on different places and especially in newly captured areas or landings, and the phrase took on connotations of the presence or protection of the US armed forces
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