In the mid 1800's in Japan, there were a large number of  styles ("ryu") of jiujitsu (sometimes spelled "jujitsu"). Techniques varied between ryu, but generally included all manner of unarmed combat (strikes, throws, locks, chokes, wrestling, etc.) and occasionally some weapons training.

One young but skilled master of a number of jiu jitsu styles, Jigoro Kano, founded his own ryu and created the martial art Judo (aka Kano ryu jiu jitsu) in the 1880's. One of Kano's primary insights  was to include full power practice against resisting competent opponents, rather then solely rely on the partner practice that was much more common at the time.

One of  Kano's students was  Mitsuo Maeda,  who was also known as Count Koma("Count of Combat"). Maeda emigrated to Brazil in 1914. He was helped a great deal by the Brazilian politician Gastao Gracie, whose father George Gracie had emigrated to Brazil himself from Scotland. In gratitude for the assistance, Maeda taught jiu jitsu to Gastao's son Carlos Gracie. Carlos in turn taught his brothers Osvaldo, Gastao jr, Jorge and Helio.

In 1925, Carlos and his brothers opened their first jiu jitsu academy, and Gracie Jiu Jitsu was born in Brazil.

At this point, the base of techniques in Brazilian Jiu Jitsu (BJJ) was similar to those in Kano's Judo academy in Japan. As the years progressed, however, the brothers (notably Carlos and Helio) and their students refined their art via brutal no rules fights( "Vale Tudo"), both in public challenges and on the street. Particularly notable was their willingness to fight outside of weight categories, permitting a skilled small fighter  to attempt to defeat a much larger opponent. 

They began to concentrate more and more on submission ground fighting, which allowed a weaker man to defend against a stronger one, bide his time, and eventually emerge victorious. 

In the 1970's  the undisputed jiu jitsu champion in Brazil was Rolls Gracie (Carlos Gracie's son). He had taken the techniques of BJJ to a new level. Although he was not a large man his ability to apply leverage using all of his limbs was unprecedented. He also developed the first points system for BJJ only competition. The competitions required wearing a gi. The fighters  were  then separated by grading and weight divisions. Was the beginning  of competitive BJJ. 

BJJ techniques have continued to evolve as the art is constantly tested in competitions. In the early 1990's, Rorion Gracie (Helio's son) moved from Brazil to Los Angeles. He wished to show the world how well Brazilian JiuJitsu worked. In Brazil, no rules Mixed Martial Art (MMA) contests had been popular since Carlos Gracie first opened his academy in 1925, but in the world at large most martial arts competition was internal to a single style, using the specialized rules of that style's practice.

Rorion and Art Davie created the Ultimate Fighting Championship (UFC), a series of pay-per-view television events in the United States that began in 1993. They pitted experts of  different martial arts styles against each other in an environment with very few rules, in an attempt to see what techniques "really worked" when put under pressure. Rorion also entered his brother Royce Gracie, an expert in BJJ, as one of the contestants.

Royce dominated the first years of the UFC against all comers, amassing eleven victories with no fighting losses. At one event he defeated four different fighters in one night. This,  from a fighter that was smaller than most of the others (at 170 lbs in an event with no weight classes), looked thin and scrawny, and used techniques that most observers, even experienced martial artists, didn't understand.

In hindsight, much of Royce's success was due to the fact that he understood very well (and had trained to defend against) the techniques that his opponents would use, whereas they often had no idea what he was doing to them. In addition, the ground fighting strategy and techniques of BJJ are among the most sophisticated in the world. Besides the immediate impact of an explosion of interest in BJJ across the world (particularly in the US and Japan), the lasting impact of Royce's early UFC dominance is that almost every successful MMA fighter now includes BJJ as a significant portion of their training.