The 181 was created to fill in the gap between the old Munga-jeep and the Europa-jeep. The Europa-jeep was a running project and could not be delivered soon enough. The German Army asked VW to built them a decent polyvalent car. VW made 16 prototypes (called type 18) and gave them to the German army to be tested. Tests were very promessing, so VW soon delivered the first series of 181's to the armies of different European countries (Germany, Denmark, Austria, Belgium, The Netherlands, Greece).
Nice picture of such a prototype while tested in the German army:
The Europa-jeep project was cancelled at the end. No problem for VW, in 1979 they came up with the mighty VW 183 Iltis.