"Canon" is derived front the Greek word "Kanon," signifying a measuring rod. Thus, to have the Bible "canonized" meant that it had been measured by the standard or test of divine inspiration and authority. It became the collection of books or writings accepted by the apostles and leadership of the early Christian church as a basis for Christian belief. It is the standard by which all Christians throughout the ages live and worship.
The Old Testament canon was already in place by the time Jesus walked the Earth, and the criteria used by the ancient Israelites is not known. The New Testament, on the other hand, was developed in a time period for which we have detailed written history. The criteria were:
1. The book was written by someone who knew Jesus. (Paul did not know Jesus while He was on Earth, but met Him in the Damascus road incident.)
2. The book was universally used and accepted by Christians. (Even within New Testament Scripture we see early acceptance of some of the important writers of what would become canon.)
3. The book was commonly read at Christian worship services. (We see signs of these services in many books, including those which capture early Church hymns.)
4. The book was consistent with the Old Testament and established apostolic teaching. (As Jesus noted, Christianity doesn't replace or correct the Old Testament, but it fulfills it.)