This is an excerpt of a much larger article covering the history of Jiu-Jitsu. The entire article is here:
http://www.bjjfighter.com/History/Without further ado...
Kano was born on October 28, 1860, the third son in his family, which also consisted of two girls. Kano and his family moved to Tokyo in 1871 during a time in which great changes were sweeping Japan both socially and politically. Kano's father was a high-ranking government official which provided the family with both wealth and prestige. As a young man Kano was very intelligent and learned, unfortunately he was not nearly as gifted physically. By his mid teens Kano was full-grown, he stood only 5 feet 2 inches and weighed approximately 90 pounds. In school Kano was harassed, beaten, and bullied on a regular basis. Kano refused to allow himself to be taken advantage of and made his decision to study Jiu-Jitsu, which still had a reputation of making men strong. However, Kano's father forbid his son from studying the art, believing it was uncivilized and boorish. Kano went against his father's orders (which was unheard of at the time) and sought out instruction in Jiu-Jitsu.
He began looking for a teacher. Only a few still taught the old fighting arts. Jiu-Jitsu had nearly been swept away by the Meiji Restoration. The negative social view of Jiu-Jitsu pushed it into obscurity; it was then only practiced by an exclusive group of celebrated masters. Kano began taking lessons despite the aforementioned difficulties. He originally studied under a teacher named Ryuji Katagiri. Katagiri did not take Kano seriously due to his youth, and merely provided him with a few introductory lessons and then told him to study hard.
In 1878 Kano enrolled in Tokyo Imperial University. While at the university Kano sought the company of an osteopath, a profession that historically included Jiu-Jitsu instruction. Following a meeting with Teinosuke Yagi, a local bone doctor, Kano was introduced to Hachinosuke Fukuda, a master of Tenjin-Shinyo Ryu Jiu-Jitsu. Tenshin shinyo ryu is a school of jujutsu founded by Iso Mataemon highly regarded for its vital-point attacks (atemi-waza) and immobilization methods (torae). Popular belief is that the art was a forging of the schools Yoshin ryu and the Shin-no-Shindo ryu.
Contrary to many Jiu-Jitsu schools Fukuda emphasized free-style practice over kata (forms), which resulted in a more realistic training approach (this would later heavily influence Kano's preference towards randori). Unfortunately, after only one year of training with Kano Fukuda suddenly fell very ill and died. Following Fukuda's death Kano began another Tenjin-Shinyo Ryu instructor named Masatomo Iso (who's teaching and training style was similar to Fukuda's). Kano dedicated all of his free time to Jiu-Jitsu. He would train with an incredible passion. His intensity eventually reached the point where he would go home exhausted, fall asleep into nightmares, and wake up shouting Jiu-Jitsu words and kicking off his blankets. However, Kano's diligence paid off, by time he was 21, he had become a master of Tenjin-Shinyo Ryu Jiu-Jitsu.
Kano continued his study of Jiu-Jitsu under the Kito ryu with master Tsunetoshi Iikubo. It is interesting to note that a previous master of Kito Ryu, Kuninori Suzuki, modified the name of the art from Kito-kumiuchi to Kito-ryu Judo in 1714. However, as time went on, Kito-ryu Judo began to be referred to as Kito-ryu Jiu-Jitsu, but the use of the term Judo initially originated from this source. Kito-ryu consisted of mainly throwing techniques. As Kano studied the details of the art's techniques he devised methods make them more effective. He noticed that although throws relied heavily on leverage to achieve their effectiveness, they did not take into account the importance of balance. He realized that a throw demanded significantly less effort and simultaneously yielded a much greater result if it was executed at the moment one's opponent was off balanced. Kano deemed this concept of off balancing "kazushi". Kano became so skilled at utilizing kazushi that one day he threw his master Iikubo three times to which Iikubo proclaimed, "From now on you teach me". Kano was then given the title of master in Kito-Ryu. Kazushi is now recognized as one of the essential concepts in all of Jiu-Jitsu. Kano continued to study other forms of Jiu-Jitsu as well as many western-wrestling styles and while under Iikubo, he developed the new throws of kata guruma, uki goshi, and tsuri-komi-goshi.
When Kano graduated from Tokyo University he was immediately appointed to teach literature at the Gakushin, an educational facility for the descendant of the Japanese elite. In 1882, at the age of 22, Kano took nine of his students to the Eishoji temple, where he began teaching Jiu-Jitsu. On occasion, Iikubo would aide Kano with the instruction. The Eishoji priests would tolerate Kano's practices, however, especially when Iikubo visited, practice could become intense and violent. As a consequence mortuary tablets would fall onto the floor and on occasion the floor itself would begin to collapse, and Kano would be forced to crawl under the temple with a lantern to fix broken boards. Since Jiu-Jitsu was still frowned upon by the general public, his students would attend practice by promising their parents that they were going to study literature with Professor Kano.
Eventually the priests grew tired of the damage being done by the Jiu-Jitsu training and Kano was obliged to relocate his group to his home in 1883. It was at this time that Kano began using the term Kodokan Judo to describe his training. Kano used this term to differentiate his style from the old Jiu-Jitsu and to signify his deeper philosophy, which was influenced from Chinese Taoism. Kano described his system by "taking together all the merits I have acquired from the various schools of Jiu-Jitsu, and adding my own devices and inventions, I have founded a new system for physical culture, mental training, and winning contests. This I call Kodokan Judo". Kodokan Judo literally translated to, the Hall (kan) for Studying (ko) the Gentle (Ju) Way (do).
In addition to the concept of kazushi the major difference between Kano's Judo and the various ryus of Jiu-Jitsu was the idea of "randori" or free sparing. A great many Jiu-Jitsu schools would only practice their techniques in Kata, pre-orchestrated forms against a non existent opponent. Kano saw that Kata was extremely limiting because without a live opponent there was no guarantee that the motions practiced could actually be used against someone in real combat. Kata was like learning to drive without ever getting behind the wheel. With randori the techniques were practiced against a fully resisting opponent, allowing one to truly test and refine their skills. Another idea Kano did not embrace was the idea of "Shobu" or sudden death. This was the idea that an opponent could be defeated with one fatal blow. Kano saw that when fighters trained for only one technique it promoted extreme caution. Conversely, randori promoted risk taking which led to a variety of creative strategies and tactics.
In 1885, the Kodokan had their first tournament with the Metropolitan police pitting the police Jiu-Jitsu against the Kodokan Judo in organized competition. The Kodokan was victorious in all matches. In 1886, the Tokyo Police hosted another tournament between the Kodokan and Totsuka-ha Yoshin-ryu Jiu-Jitsu, which was considered the strongest style of Jiu-Jitsu at the time. The Kodokan lost only two matches, and drew one; they were victorious in the other 12 matches fought. As a result of the competition, Judo had overtaken Jiu-Jitsu as the strongest martial art in Japan.
Following the Kodokan's victory Kano instituted the first ranking system in martial arts history. Kano saw the lack of rank as very unorganized; he felt senior students should be differentiated from new ones. In addition, Kano believed the lack of ranking provided students with little incentive to train because they were not presented with clear goals to guide their ambitions. Also, there were no degrees for teaching and Kano considered instruction certification to be of paramount importance. To remedy these shortcomings, Kano introduced a belt ranking system to represent various levels of technical growth in the Judo. Non-black belt ranks were a reflection of ones understanding of Judo's basic foundation. Once one was considered to have mastered a sufficient foundation of Judo they were given first Dan, or black belt, rank. Originally the belt system consisted of three white belt, three brown belt, and three black belt grades. Eventually, the system expanded to include a variety of colored belts, such as yellow, green, and blue.
The Kodokan had established itself as a well-respected and undefeated school until 1900 when it entered a contest against Fusen Ryu Jiu-Jitsu. The Fusen Ryu differed from other Jiu-Jitsu school in Japan in that they dedicated almost all their training to "ne waza", or grappling techniques. At this point the Kodokan was skilled in striking and without companion in throwing skill, however they had very limited ability in ground grappling. In the contest the Fusen Ryu realized they could not outmatch the Kodokan on their feet so they employed a unique ploy. The Fusen Ryu fighters would pull the Kodokan fighters between their legs and fall to the ground, once on the ground they would apply a choke or joint lock and force the Kodokan fighters to submit (the modern day equivalent to "pulling guard"). The Kodokan were defeated by submission in all ten of their matches, it was the school's first defeat. Kano now realized that ne waza was of equal or greater importance to tachi waza (throwing techniques). Immediately following his school's defeat Kano persuaded Fusen Ryu's headmaster, Mataemon Tanabe, to instruct him on Fusen Ryu's techniques and principles. Kano also sought out a similar grappling intensive style Jikishin Ryu Jiu-Jitsu and began to incorporate its techniques into the Kodokan. Over the next six years Kano composed a method of ne waza specifically designed for Kodokan Judo. Included in this system were three main types of techniques: Katame Waza (locking techniques), Shime Waza (choking techniques), and Osae Waza (holding techniques). Kano incorporated ne waza into his randori training. Victory was signified when one opponent tapped the mat. Tapping was a symbolic admission of death, which kept alive the samurai tradition of life and death combat while keeping Judo safe and sportive to train daily. Kano managed to show the Japanese public that Judo was both effective for combat and sport. The Japanese embraced the sport of Judo, and Judo/Jiu-Jitsu was no longer considered a barbaric or outdated practice.