Spatially localized invariant solutions of plane Couette flow are organized in a snakes-and-ladders structure strikingly similar to that observed for simpler pattern-forming partial differential equations [Schneider, Gibson, and Burke, Phys. Rev. Lett. 104, 104501 (2010)PRLTAO0031-900710.1103/PhysRevLett.104.104501]. We demonstrate the mechanism by which these snaking solutions originate from well-known periodic states of the Taylor-Couette system. They are formed by a localized slug of wavy-vortex flow that emerges from a background of Taylor vortices via a modulational sideband instability. This mechanism suggests a close connection between pattern-formation theory and Navier-Stokes flow.