The modern horse derives from a small forest dwelling creature that was more dog like in appearance and stood only 10-20" tall at the shoulder. The Hyracotherium (previously known as the Eohippus (Dawn Horse), was very different to the horse we know today, with padded feet and toes rather than hooves. The likely diet of Hyracotherium was fruit and fairly soft foliage.
Over a period of around 20 million years the horse changed very little with the main changes being in the teeth which indicated that the diet was changing to one of more tougher plant material and also the vestiges of the 1st and 2nd toes which could still be seen in Hyracotherium vanishing.
The Miohippus shows the next changes becoming larger in size and longer in leg to adapt to the North American drier open grasslands that required the animal to have more speed to survive the more open terrain. The animal began to stand permanently on tiptoe and leg bones began to fuse together. The face, neck and the back had also become longer. The teeth particularly started to change in order to adapt to grazing on grassland, with increased tooth crown height allowing the tooth the grow out of the gum continually as the tops were worn down, harder crowns from a cement layer and ridges for grinding.
Around 17 million years ago the Merychippus arose. This was the most horse like predecessor and stood around 10 hands high. Although still 3 toed it was highly adapted to running fast on hard ground. The central toe had developed a convex hoof structure and the bones in the forearm fused to stop rotation.
Around 10-15 million years ago during the Pliocene period evolved several one toed equids - Pliohippus, Astrohippus and the one most likely to have given rise to the modern horse Dinohippus.
Equus - the ancestor of all modern horses finally arrived 4 million years ago. The early ancestors were around 13.2 hands high with one hoof that was prevented from twisting by lateral (side) ligaments. The teeth were straight, high crowned and strong. Fully adapted to a grazing animal.