[Fozzie (OP)]

Why is it, that in the majority of old photos the background is pale and misty as though it was foggy at the time? I have noticed this even on studio portraits, so it can't be the weather. It has been suggested that it was something to do with the long exposures used at the time, but how could the chemicals in the film know what was close and what was far away? I can't think of any process in use today which would cause this effect.

[RD]

Their film was overly sensitive blue and UV light ...

Orthochromatic films were first produced by Hermann Wilhelm Vogel in 1873 by adding small amounts of certain aniline based dyes to photographic emulsions which had hitherto been sensitive to blue light only

http://en.wikipedia.org/wiki/Orthochromatic

As a result the skies in their landscapes tend to be featureless white, and Caucasian skin tones rendered abnormally dark, (also blue eyes rendered abnormally light). 

UV filters are used ... in photography to reduce haziness or fogginess created by ultraviolet light.

http://en.wikipedia.org/wiki/UV_filter

[I don't think the early Victorians had UV filters or coatings on their lenses]

Also see aerial perspective.

Their film was also insensitive requiring long exposures and/or a wide lens aperture.
A wide aperture only gives a shallow depth of field: the zone in focus may only be a few inches deep, or less ...

 

http://en.wikipedia.org/wiki/Depth_of_field