In Harry Potter and the Sorcerer's Stone there is following tirade from Petunia Dursley:
"Knew!" shrieked Aunt Petunia suddenly. "Knew! Of course we knew! How could you not be, my dratted sister being what she was? Oh, she got a letter just like that and disappeared off to that - that school- and came home every vacation with her pockets full of frog spawn, turning teacups into rats. I was the only one who saw her for what she was - a freak! But for my mother and father, oh no, it was Lily this and Lily that, they were proud of having a witch in the family!"
Why would Lily do this? Didn't she have the Trace at that point? Or was the Trace and the restriction for underage magic introduced later (unlikely since everyone knew about it)?