No major dictionary website carries the origin of this proverb. Some blogs speculate that it comes from a locomotive usage. In the days of the steam engine, engines would be equipped with bells and whistles to let people know of their presence. Over time, this got distorted to its current meaning, of non-essential add-ons to products to entice customers.
I can imagine that this has a more agrarian origin. In cattle fairs, where cattle are bought and sold, cattle are often decorated with festoons and beads and so on, to entice potential customers and hopefully increase value as well. Does anyone have anything to substantiate this, or a better explanation of its origin?
Edit: the n-grams show that it was used first in British English in 1847, and in American English as late as 1865. This would suggest a British origin, rather than the commonly accepted American one.
Best Answer
The Collins dictionary has this to say about the etymology of this phrase:
http://www.collinsdictionary.com/dictionary/english/bells-and-whistles
Fairground organs could be very colorful, so it's easy to see how they would serve as a basis for the idiom: