Prior to this, while there was certainly harmony with dissonance and consonance and resolution, it was not nearly so dynamic. Even Baroque harmony, which is certainly capable of dramatic effect, tended to be much more static. A typical form, with ritornelli, returned frequently and predictably to the tonic while with Haydn, Mozart and Beethoven (and yes, C. P. E. as well) you could go anywhere and when you returned to the tonic was usually a bit of a surprise.
The dynamic or dramatic approach to harmony was so successful in fact, that it seems to have destroyed itself through excess. The critical element always seems to have been the leading tone, as it is what drives us toward the tonic, and resolution. The role of the leading tone was expanded again and again. It was what generated modulations or temporary "tonicizations". Popping an F# into a piece in C major drives us toward the key of the dominant, G major, as it is the leading tone to G. There is a whole field of harmonic theory that deals with "secondary" or "applied" dominants, that is, the use of chords that are the dominants of other chords as created through leading tones. For example, in the key of A minor, the E major chord with its G# is the dominant of A. But you often see that harmony preceded by B major, containing a D# which is the leading tone to E. Sometimes composers even prepare a harmony by going further up the ladder with the dominant of the dominant of the dominant! All this is generated by the use of the leading tone.
An even more intense version of this is the group of augmented sixth chords which approach the dominant with two leading tones and act as a kind of super-duper secondary dominant to the dominant. This is an Italian augmented sixth chord in C major, moving to the dominant:
There are also French and German ones, which are configured a bit differently. Notice that this chord contains not only the leading tone to the dominant, G, the F#, but also an inverted leading tone which goes down to the other G, A flat. The interval between A flat and F# is an augmented sixth, which gives the name to the chord.
Another kind of inverted leading tone gives us the Neapolitan sixth chord, so called because of its supposed origins with composers from Naples. It has a similar function to the augmented sixth chords as it is used to prepare the dominant. Here it is in C major:
It is called a "sixth" because it usually appears in first inversion, as it does here. The chord, in C major, is D flat, F, A flat: a major chord on the flat supertonic. The A flat goes to the G as another inverted leading tone. Both of these are often described as originating from the Phrygian mode where the cadence is from F to E, going down a semitone.
Sorry for all the technical vocabulary! If you want more discussion, Wikipedia has pretty good articles on both the augmented sixth chords and the Neapolitan.
Another technique in this same general area is the frequent use of the key of the flat submediant in Schubert and the Romantic composers. It is, of course, the key of A flat in C major.
Composers kept upping the stakes with the use of the leading tone until we get to Wagner who rather burned out the circuits. It is not that Wagner weakened the fundamentals of harmony: they were crucial to his method, which was to extend the dissonance for long periods without resolution. There is finally a resolution to the tonic, but it takes a long time.
Perhaps the final, symbolic extinction of the leading tone is at the very end of Richard Strauss' tone poem Thus Spake Zarathustra which is in the key of C major. It's opening passage in C major and minor is very famous from the movie 2001: A Space Odyssey. But it ends with this:
A B major chord in the high winds held, while the low basses play a C. After this, composed in 1896, the leading tone seems to have lost its power to create tension and many composers began writing chromatic music with no real tonic and, hence, no leading tone.
Now, the leading tone is almost the one harmonic device you simply cannot use! Just as an experiment the other day I wrote a short passage using leading tones in a new piece for orchestra I am writing. It sounded so horribly trite and out of place that I removed it immediately.
There is a great deal of talk about and use of the modes in music these days and I think that the main reason for their use is that they contain NO leading tones (except, of course, for the Ionian mode which is the same as C major and therefore not used).
What composers seem to do nowadays is either stay in one harmony throughout, or use drones or pedals or modes. Modulation is rare and never made clear through the use of leading tones. We have moved away from the drama and dynamic harmony of the 18th and 19th centuries to something much more static. Go and listen to a bunch of recent music and I think you will see what I mean. Then compare it to, say, Mozart.
Harmony these days tends to be rather static.
Here are a couple of examples. The first is Dark Waves by John Luther Adams:
And the Overture to the Magic Flute by Mozart: