It is just another form among hundreds of other forms of chi gung practices, but they got into trouble with the PRC government for giving some religious / magical spin to it and also got a little political in challenging the communist government by staging sit-ins. It was declared a cult with all the negative connotations.
"Falun" means 'divine/magical wheel' It was the 'divine or magical' part that did not go down well.
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I'll rather be happy than right, anytime.