In the late 17th century this phrase started appearing in speech. At first it was simply "a pill to swallow" and then as the years went by different people started adding the word "hard" or even "bitter" to the saying. The idea then, and now, is that pills can be difficult to swallow - and in the figurative sense a hard pill to swallow means accepting something that is hard to believe. ( source )

In 1917 the lack of funding precipitated by the earlier banking crisis led to a dispute between copper mining companies and mineworkers in Bisbee, Arizona. The workers, some of whom had organized in labour unions, approached the company management with a list of demands for better pay and conditions. These were refused and subsequently many workers at the Bisbee mines were forcibly deported to New Mexico. It's tempting to surmise, given that the mineworkers were faced with a choice between harsh and underpaid work at the rock-face on the one hand and unemployment and poverty on the other, that this is the source of the phrase. The phrase began to be used frequently in US newspapers in the late 1930s, often with the alternative wording 'between a rock and a hard spot'. Read about the full story here as well as some other times it showed up. ( source ) In a figurative sense the phrase means that you are faced with two unsatisfactory choices and one needs to be chosen....