In English an igloo is a dome of snow blocks. In Inuktitut, the word it came from does not mention snow at all.
Iglu means "house" or "dwelling." Wikipedia's article on the igloo notes that the Inuit word can be used for a home built of any material. The plural is igluit. A house made of snow has its own name: igluvijaq. In the dialect of the Igloolik region of Nunavut, iglu covers other buildings and igluvijaq is kept for the snow house.
So the English word is a case of narrowing. The Dictionary of Canadianisms on Historical Principles lists the snow dome as the main sense, and calls the restriction to snow houses a non-Inuit specialization. Its rarer sense, any Inuit house other than a tent, is described as virtually unknown south of 60 degrees north.
The borrowing happened gradually. Merriam-Webster gives 1856 as the first known use of igloo. The Canadian dictionary has older traces. A 1771 account describes a snow-built house that people called "aneo-iggilo," a snow house. A glossary from the late 1770s, drawn from the missionary David Crantz, glosses Greenlandic iglo as "a house." An 1832 text mentions "iglou porches" of hardened snow.
The snow house itself was less widespread than the word suggests. According to Wikipedia, snow igloos were traditionally used only in Canada's Central Arctic and the Qaanaaq area of Greenland. Other Inuit used snow mainly to insulate houses built of whalebone and hides.
Where they were used, they worked well. Outside temperatures can fall to minus 45 degrees Celsius. With body heat alone, the inside of an igloo may sit anywhere from minus 7 to 16 degrees. Large ones could hold 20 people for feasts and dances.
The spelling iglu has not disappeared. The Canadian dictionary notes that it is still used in Nunavut newspapers, though igloo is far more common. The Nunavut coat of arms, described in 1999, includes an igloo standing for traditional life.