When Guy Fawkes was killed and the "Catholic plot to overthrow the rightful monarch" was exposed, bonfires were lit in the streets of London to celebrate "Gods deliverance of the rightful sovereign from the papist plot". I suppose it was a natural extension from simply lighting bonfires to adding an effigy of the Catholic traitor. Catholics were intensely disliked by the protestant government of the day and any opportunity to put them in a bad light was taken.