Continuity mistake: When Larry is taken home after being bitten by the werewolf, the door opens and Larry is seen staggering in. In the next shot, the door is seen opening again.

The Wolf Man (1941)
Ending / spoiler
Directed by: George Waggner
Starring: Claude Rains, Lon Chaney Jr., Ralph Bellamy, Warren William
The Wolf Man finds Gwen and attacks her. Sir John, hearing the screams, rushes to the scene and begins to strike the Wolf Man with the silver handled cane eventually killing the Wolf Man. The gypsy woman Maleva appears and as she says a prayer, the Wolf Mans body slowly begins to turn back into Larry. Sir John is shocked to see his son now lying dead on the ground and many people believe that Larry died protecting Gwen from an ordinary wolf.
Racer X
Maleva: The way you walked was thorny, through no fault of your own, but as the rain enters the soil, the river enters the sea, so tears run to a predestined end. Your suffering is over, Bela my son. Now you will find peace.
Trivia: Even though Maria Ouspenskaya plays Bela Lugosi's mother in the movie, she was only 6 years older than him.
Question: At the time that this movie was made, nobody knew what made a werewolf, what could kill a werewolf, or when a werewolf would appear. Who decided that these things could happen?
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Answer: Werewolves as a concept date back many years - this film originated many of the current conventions though, so the simple answer to your question is "the writers of this film". See the Wikipedia for more info - http://en.wikipedia.org/wiki/Werewolf.