The split in Islam between Sunni ("one who follows the customs") and Shia ("partisan" for Ali) traces back to the first Caliph Abu Bakr and his decision to disown the family of Muhammad's cousin Ali.
The crisis deepened after the murder of the third Caliph, Uthman, in 656 when Ali made a bid to become the next Caliph. Ali's right to succeed as caliph was challenged by the Syrian governor, Muawiyya (Uthman's nephew), on the grounds that his uncle's murder had not been properly avenged. Several battles were fought, including the Battle of the Camel (in 656) and a battle on the Plain of Siffin in 658 near the ancient Mesopotamian capital of Ctesiphon. Accounts differ as to which side was winning the battle at the point where both sides agreed to submit the dispute to a form of binding arbitration.
The arbitration was decided in favor of the Syrian governor, and Ali was condemned by a puritanical faction of his own followers (the Kharijites) for failing to prevail over Mu'awiyya. Thus, Muawiyyas challenge succeeded, and he became the first Umayyad caliph, based in Damascus. Ali was deposed. He fled, but was stopped at his capital Kufa in southern Iraq in 661 where he was felled by a Kharijite assassins poisoned arrow. He was buried four miles away in the city of Najaf, a major Shiite shrine city.
Alis son, Husayn, was himself martyred by the Umayyad caliph, Yazid, at Karbala, also in Iraq, in 680. Husayns death is commemorated each year on the tenth (Ashura) of the Muslim month of Muharram, the first month of the calendar year, by Shiites who perform passion-plays depicting the sad events. Kufa and Karbala are two of the principal Shiite shrines. The fact that Ali and Hussein were both martyred set a devotional tone within Shiism that emphasized the virtues of sacrifice and martyrdom for its followers.
Under Mu'awiyya, the Muslim state was transformed into a world empire. In spite of this achievement, to Shiites Muawiyya and the Umayyads are the bitterest of enemies.
Hence, the essential difference between the Shia and the Sunnis is that the Shia believe in a dynastic succession (the new caliph must be a blood descendant of the Prophet Muhammad) while the Sunnis believe that any qualified person from the tribe of the Prophet (the Quraysh) is eligible to succeed as caliph.
Shia Islam would come to full flower in Iran (Persia). It became the official religion of the region when the Safavid dynasty assumed power in 1500. There are two principal groups: the Seveners and the Twelvers.
The Seveners, or Ismailis, were followers of the seventh imam ("righteous master," or, literally, "the plumb line") after Ali, Ismail, who, they believe, was occultated in the year 760 ( ghaiba, the "absence" or "concealment"). That is, they believe he did not die but was taken directly up to heaven. The Seveners believe in the actual divinity of Ismail, that he participates in and possesses all of Gods nature and will. One famous branch of the Seveners was the Hashasheen, who beginning in 1090 under the leadership of Hasan al-Sabbah conducted suicide raids against Christian and Muslim "infidels," believing that death through martyrdom during jihad was glorious and would result in their immediate admittance into paradise. Our English word, "assassin" derives from this name.
The second group is the Twelvers, or, Ithna Asheri, followers of the twelfth imam after Ali, Muhamad al-Muntazir who is believed to have been occultated in the year 878 and thought to be returning as al-Mahdi ("the rightly guided one"). The Twelvers dominate Iranian religious life today. The religious leaders, or mullahs, are regarded as the representatives of this "hidden Imam." The term ayatollah ("sign of God") is an honorific one accorded senior mullahs within the ulema, which in Shia Islam is very hierarchically organized as opposed to the Sunni ulema which emphasizes horizontal relationships of authority in an umma ("community") and stresses shura ("consensus"). In Twelver Shiism, the Hidden Imam is regarded as infallible, and thus his earthly successors are, too.
Shia persecution at the hands of Sunnis quickly led to the systematic endorsement of the principle of Taqiyya (from the Arabic root wa-qa-'a meaning to "safeguard"). Taqiyya is self-protection, hence permission to practice dissimulation in order to protect oneself from harm at the hands of a stronger and hostile power. This practice was based on s.16:106 and s.49:13 from the Qur' an. (in the latter, the word atqaakum ("the most pious among you") comes from the same root as taqiyya). Ironically, while first used by Shiites to protect themselves from Sunnis, the principle of Taqiyya was gradually adopted by Sunnis themselves as they increasingly faced persecution from other sources (the West and the Mongols, for example).
The Iranian Revolution of 1979, one of the most successful revolutions of the twentieth century, marked the beginning of the first serious challenge by Shiites to Sunni predominance, vested since the 1960s in Saudi Arabia, the guardian of the holy shrines of Mecca and Medina, therefore, also regarded as the legitimate leader of Islam worldwide. Iran began vying for this honor by putting pressure on Saudi Arabia to admit more and more Shiite pilgrims to Mecca and by staging riots by Shiites during the pilgrimage (see 1987) designed to raise questions about Saudi Arabia's capacity to administer and oversee the rites safely. By 2004, in the wake of the United States invasion of mostly Shiite Iraq the previous year and signs that the Americans were not doing well there, Sunni Arab leaders had begun to complain openly and nervously about what Jordan's King Abdullah II dubbed the growing "crescent" of influence that Shiite non-Arab Iran was spreading across the entire region. And, in 2006, Iran's role in supplying the Lebanese Shiite group Hizbullah and maintaining that group's capacity to make war on Israel came under intense scrutiny.