It was the invention of Dr. Daisuke Serizawa, who feared the power of the device that he created.
The weapon was first revealed to Emiko Yamane by Daisuke Serizawa when they were in his lab. He demonstrated it on a tank of fish, which were instantly reduced to skeletons.
Fearing that it would lead to another arms race, the doctor sacrificed himself as he detonated his device underwater, killing both Godzilla and the chance that his device would become a weapon.
Godzilla vs. Destoroyah
The Oxygen Destroyer would carry on a larger role, and was later revealed to have awoken prehistoric creatures that mutated into the monster Destoroyah in the 1995 film Godzilla vs. Destoroyah. That film also noted that "if it had been used on the ground, it's quite obvious that Tokyo would've become a cemetery."
The chemical reaction initiated by the weapon (which is the actual part that destroys the oxygen) also powers one of Destoroyah's attacks, a beam of micro-oxygen, in the shape of a double-helix, with the destructive power of the Oxygen Destroyer itself.
Godzilla Against MechaGodzilla
In Godzilla Against MechaGodzilla, the Oxygen Destroyer didn't dissolve Godzilla's skeleton, and Kiryu's blueprints incorporated the original Godzilla's skeleton within it to make the design process and construction less strenuous.
The device works by releasing a chemical stored within it's spherical center. Once released, the chemical (dubbed Micro-Oxygen) reacts violently with the water, isolating oxygen molecules and splitting them. The molecules are then liquified. This means that any organism exposed to the chemical will first suffocate from the lack of oxygen, and then disintegrate. Depending on the amount of the oxygen destroying chemical released, the body of the victim will either be eaten down to the bone or destroyed completely. When used to its full potential, the Oxygen Destroyer will leave no remains.
Godzilla vs. Destoroyah (Stock Footage)
Godzilla Against MechaGodzilla (Stock Footage)
It should be noted that even though many weapons have been created to kill Godzilla, the Oxygen Destroyer is the only man-made weapon to accomplish this task.
The Oxygen Destroyer prop is the oldest remaining Godzilla prop known, first being used in 1954 and recently seen in 2013, being displayed at the Godzilla Encounter, making the prop over 59 years old at the time.