Halliday & Matthiessen (2014: 630):
In some languages, as pointed out earlier, there is a close correspondence of demonstratives and personals, such that there are three demonstratives rather than two, and the direction of reference is near me (this), near you (that) and not near either of us (yon). This pattern was once widespread in English and can still be found in some rural varieties of Northern English and Scots. In modern standard English yon no longer exists, although we still sometimes find the word yonder from the related series here, there and yonder; but another development has taken place in the meantime.
Given just two demonstratives, this and that, it is usual for that to be more inclusive; it tends to become the unmarked member of the pair. This happened in English; and in the process a new demonstrative evolved which took over and extended the ‘unmarked’ feature of that – leaving this and that once more fairly evenly matched. This is the so-called ‘definite article’ the. The word the is still really a demonstrative, although a demonstrative of a rather particular kind.