The division between Shia and Sunni dates back to the death of the Prophet Muhammad, and the question of who was to take over the leadership of the Muslim nation. Sunni Muslims agree with the position taken by many of the Prophet's companions, that the new leader should be elected from among those capable of the job. This is what was done, and the Prophet Muhammad's close friend and advisor, Abu Bakr, became the first Caliph of the Islamic nation. The word "Sunni" in Arabic comes from a word meaning "one who follows the traditions of the Prophet."
On the other hand, some Muslims share the belief that leadership should have stayed within the Prophet's own family, among those specifically appointed by him, or among Imams appointed by God Himself.
The Shia Muslims believe that following the Prophet Muhammad's death, leadership should have passed directly to his cousin/son-in-law, Ali. Throughout history, Shia Muslims have not recognized the authority of elected Muslim leaders, choosing instead to follow a line of Imams which they believe have been appointed by the Prophet Muhammad or God Himself. The word "Shia" in Arabic means a group or supportive party of people. The commonly-known term is shortened from the historical "Shia-t-Ali," or "the Party of Ali." They are also known as followers of "Ahl-al-Bayt" or "People of the Household" (of the Prophet).
P.S i am a sunni :)