The silent W in English pronunciation?

As a Brit, I just instinctively unserstand that places like Southwark and Chiswick are pronounced Suthuck and Chizzick. But my American friends think we're utterly nuts for not pronouncing them South Wark and Chizz Wick. Anyone know when it became English practice to use the silent w and why, this being so, it hasn't dropped out of the spelling too?