Jaisalmer was one of the last states to sign a treaty with the British. During the British Raj, Jaisalmer was the seat of a princely state of the same name, ruled by the Bhati clan of Rajputs. The present descendant is Brijraj Singh. Though the city is under the governance of the Government of India, a lot of welfare work is carried out by him and his family. The Royal Family still commands a lot of respect from the people.
Traditionally, the main source of income was the levies on the caravans. However, the glory of Jaisalmer faded when Bombay emerged as a port and the sea trade replaced the traditional land routes. The partition of India in 1947 lead to closing of all the trade routes on the Indo-Pak border and rendered Jaisalmer a drought-prone desert backwater on the international border. Ironically, skirmishes between India and Pakistan gave Jaisalmer a strategic importance and made it serviceable as an army supply depot. Later, the Rajasthan Canal served to revive the surrounding desert areas. Roads and railroads were then built, knitting the hitherto remote town with the rest of Rajasthan. Later, the Government of Rajasthan decided to promote Jaisalmer as a tourist destination.

via Wikipedia: http://en.wikipedia.org/wiki/Jaisalmer