Pugs originated in China centuries ago. There were 3 flat-faced breeds that were popular and one of them was the lo-sze, which they believe to be the direct predecessor of the pug.
As legend has it, there was an emporer with an only daughter. He was very protective of his daughter and she was not allowed any friends so that she could study the ways of her position and assume authority at the appropriate time. She concentrated on her studies and it was a lonely life. Her nanny loved her and snuck in a small dog to keep her company. The princess hid the dog in the sleeves of her robe and carried it with her everywhere, and that's how its face became smashed.
One day while out in the garden working with her father, the pup snorted and his cover was blown. The emporer demanded to know what the source of the sneeze was. Out came the pup, and the emporer was enchanted. He loved the "little prince."
The wrinkles on the forehead form the chinese character for prince. This forehead wrinkle was highly prized among the lo-sze and they were bred to continue it. You can still see this in some of the pugs today (our Daisy has this wrinkle formation).