After Muhammad’s death in A.D. 632 the leaders of the Muslim community chose Abu Bakr, the Prophet’s father-in-law and one of his earliest followers, to succeed him as caliph (from khilafa; literally, successor of the Prophet). At that time, some persons favored Ali, the Prophet’s cousin and husband of his daughter Fatima, but Ali and his supporters recognized the community’s choice. The next two caliphs, Umar and Uthman, enjoyed the recognition of the entire community, although Uthman was murdered. When Ali finally succeeded to the caliphate in 656, Muawiyah, governor of Syria, rebelled in the name of his kinsman Uthman. After the ensuing civil war Ali moved his capital to Kufa (present-day Karbala in Iraq), where a short time later he too was assassinated.
Ali’s death ended the last of the so-called four orthodox caliphates and the period in which the entire Islamic community recognized a single caliph. Muawiyah then proclaimed himself caliph of Damascus. Ali’s supporters, however, refused to recognize Muawiyah or his line, the Umayyad caliphs; they withdrew in the first great schism of Islam and established a dissident faction known as the Shias (or Shiites), from Shiat Ali (Party of Ali) in support of the claims of Ali’s line to the caliphate based on descent from the Prophet. The larger faction of Islam, the Sunnis, claims to follow the orthodox teaching and example of Muhammad as embodied in the Sunna, the traditions of the Prophet. The Sunni majority was further developed into four schools of law: Maliki, Hanafi, Shafii, and Hanbali. All four are equally orthodox, but Sunnis in one country usually follow only one school.
Originally political in nature, the difference between the Sunni and Shia interpretations took on theological and metaphysical overtones. Ali’s two sons, killed in the wars following the schisms, became martyred heroes to Shia Islam and repositories of the claims of Ali’s line to mystical preeminence among Muslims. The Sunnis retained the doctrine of leadership by consensus. Despite these differences, reputed descent from the Prophet still carries great social and religious prestige throughout the Muslim world. Meanwhile, the Shia doctrine of rule by divine right grew more firmly established, and disagreements over which of several pretenders had the truer claim to the mystical power of Ali precipitated further schisms. Some Shia groups developed doctrines of divine leadership, including a belief in hidden but divinely chosen leaders. The Shia creed, for example, proclaims: “There is no god but God: Muhammad is the Prophet of God, and Ali is the Saint of God.”.
(atheism.about.com / 20.12.2012)