When Midoriko was about to die fighting a demon, she joined her 4 soul inside her heart, with the soul of the demon to make it good and pure. By doing that, she killed herself and the demon. This created the Shikon jewel. Inside it, Midoriko and the demon souls still fought each other. This battle is depends to the person who has the jewel. The jewel can become pure (become good because Midoriko is winning) or impure (become bad because the demon is winning). Many creatures want the jewel because it can make them powerful like Midoriko. They can do anything they want with it. If someone wants to become a full demon then they will become that, just like Naraku wants to.
After many fights of different demons and humans, Shako, Sango's grandpa found the jewel from a demon called Mistress Centipede. The jewel was impure because it had been with the evil Mistress Centipede. He took the jewel to Kikyo. Only the goodness of Kikyo's priestess power could purify it and make it good. But when Kikyo is burnt because she dies by Naraku wanting the jewel and killing her, and she wants the jewel to burn and destroy along with her. Kagome, Kikyo's reincarnation gets the jewel even so, and when Mistress Centipede's bones inside the well become alive with the jewel's power when Kagome comes near, she is dragged into the well and the past where everything happened. Kagome shatters the jewel by accident when she shoots a crow which swallowed it, and has to find all the pieces before evil creatures do with Inuyasha.
Fake Shikon no TamaEdit
Some people tried to make shikon no tama themselves so that they can have its power without trying to find all the pieces. Izumo, a half-demon who turns to a demon at night, but a human at day, is a clever philosopher who likes nature and the world. He is the one who knows how to make a shikon no tama, and a frog-demon with some other demons grab him so that they can start making a fake shikon no tama. Izumo agrees and makes many copies of shikon no tamas which only has small power. He said to the frog-demon that to make the copies like the real one, they had to collect the souls of people with Aramitama (Courage), Nigimitama (Friendship), Kushimitama (Wisdom) and Sakimitama (Love). When Inuyasha and his friends come to save Izumo who plans to get them because of his friends having the souls that he needed to make a real shikon no tama.
Inuyasha had the soul of Aramitama (Courage), Shippo with Nigimitama (Friendship), Miroku with Kushimitama (Wisdom) and Sango with Sakimitama (Love). Kagome tries to save her friends who are inside the frog eggs made by the frog-demon, and in the end he is killed together with Izumo in his half-demon form. Kagome was sad because she felt for Izumo but they carried on their adventure anyway.