GNU Emacs, released in 1985, was the first significant software product of the gnu-project. It was not the first Emacs — stallman had built the original Emacs as a macro system for the TECO editor at the mit-ai-lab in the 1970s, and Emacs-like editors had proliferated since. But GNU Emacs was the first implementation written from scratch as free software under what would become the gpl-copyleft-mechanism, and it served as proof of concept for the entire GNU project.
GNU Emacs was technically significant: it was a programmable, self-documenting editor implemented in a Lisp dialect (Emacs Lisp), extensible to the degree that users could and did build entire applications — mail clients, calendars, programming environments, games — within the editor. The gnu-emacs-manual became a model of free documentation; stallman was insistent that documentation, not just code, must be free, a principle that would later generate the fdl (Free Documentation License).
The distribution model for GNU Emacs established the FSF's early economic logic: software was distributed on magnetic tapes sold by the FSF, with the understanding that recipients were free to copy and redistribute it. The "free software" was not free of charge — the tapes cost money to produce and mail — but the freedom to copy was guaranteed. This directly embodied the libre-vs-gratis distinction: you could charge for distribution but not for permission.
GNU Emacs also demonstrated something philosophically important: a high-quality, professionally useful tool had been built under the free software model without the proprietary development infrastructure. During the founding-gnu-and-fsf-1983-1991 era, Emacs was the evidence stallman could point to when arguing that his project was viable. The subsequent releases of GCC, bash, glibc, and the rest of the GNU toolchain built on the credibility Emacs established.