In _The Essential Ewan MacColl Songbook_, Peggy Seeger writes:

A letter to _The Independent_ as to the original of Kilroy brought a host of replies. The most favoured of them was the following: James Kilroy was the senior shipyard inspector at...Quincy, Massachusetts, where they built Liberty Ships.... Each weld had to be individually inspected.... It was Kilroy's peculiar custom to record his approval by writing on the weld itself, sometimes KILROY WAS HERE and sometims the famous nose-and-fingers draping over the horizontal line.... Every crewmember who sailed on one of "his" ships was continually encountering the phrase or the face...wherever there were visible welds. Kilroy soon became the archetypal watcher. Then he became Kilroy the slogger, the unknown plebs, the Rumplestiltskin, the eternal presence -- whatever you wanted him to be. He's everywhere. Is he Jack?