Thought it might be worth starting with some observations edited from Peter Harvey, Buddhism, and several Wiki inserts (noted):
The languages in which the editions of the Buddhist canon are preserved fall into two categories. First, there are the languages and dialects in which the texts circulated in India. These include local Prakrits such as Magadhi [also Maghadi], Pali and the North-Western Prakrit as well as Sanskrit.
(Note: Prakrit can mean both "original language" and "natural language." We don't know today whether Prakrit is older or younger than Sanskrit, which means "refined language.")
The Buddha himself denied preference to any one language and adopted for his preaching the local dialects of the regions through which he travelled. Thus, it is incorrect to speak of an original language of Buddhism...however, it is probably true to say that the Buddha's discourses were based on an early variety of Old Maghadi. Except for a few archaic root forms, no traces of Old Maghadi have survived.
"Grammarian Kachchayano wrote of the importance of Magadhi: 'There is a language which is the root (of all languages); men and Brahmans spoke it at the commencement of the kalpa, who never before uttered a human accent, and even the supreme Buddhas spoke it: it is Magadhi.'" (Robert Spence Hardy,The legends and theories of the Buddhists compared with history and science...)
A variation of Old Maghadi is still preserved in the language of the Theravada Canon -- Pali. Pali was the language of Vidiśā, India, which sent Buddhist missionaries to Sri Lanka. These missionaries had memorized their sermons in Pali, and the language became accepted by the Sinhalese people of Sri Lanka as the 'language of the texts' (Pali-Bhasa). It is perhaps the closest approximation to the 'original' language of Buddhism.
With the beginning of the Christian era, Prakrits became increasingly rivalled by [and blended with] the use of Sanskrit--modern scholars refer to this cross-breed as Buddhist Hybrid Sanskrit. Eventually, Prakrits and Buddhist Hybrid Sanskrit wer replaced with a more correct form of Sankrit.
Of the numerous languages of translation which preserved the canon outside India, Tibetan and Chinese are the most important, as they constitute the only languages into which the Indian texts were directly transmitted. Most other languages are secondary, in that they are based on either Tibetan or Chinese. This privileged position is reinforced by the towering volume of Tibetan and Chinese Buddhist writings, for no other cultures have preserved nearly as many scriptures in their respective languages. Above all, Tibetan translations stand out for their great accuracy and consistency, achieved by adapting the Tibetan language in translation specifically to Buddhist terminology. [An example of this in English might be "triple gem," a new English phrase specific to Buddhism.]
In Buddhism, the concept of a sacred language has little immediate applicability. We saw that the Buddha himself refused to give preference to any speech. If belief in the power of sound is anything to go by, Buddhism clearly has in Pali and Sanskrit two tongues approaching the concept of a sacred language. However, since neither of them is accepted by all Buddhists they cannot be regarded unreservedly as such.