Shia and Sunni are the two branches of Islam, separated after the death of Prophet Mohammed (PBUH). Both Shia and Sunni agree and have strong faith on oneness of God and the Quran revealed upon prophet Mohammed (PBUH). The divide between Shia and Sunnis originated only after the death of the prophet where Sunnis claimed that during the lifetime of prophet he never assigned his successor and therefore to carry forward the legacy only the members of his tribe Quraysh are qualified and subsequently the majority of muslims appointed Abu Baqr as the first caliph as he was known to be a close companion of the Prophet and his family, but he was only a political and social leader and not a spiritual leader. On the other side Shias who were relatively smaller group believed Prophet Mohammed Successor must be someone who belonged from his family. And Therefore, Shias have very strong belief that Prophet's son-in-law and cousin, Ali, was appointed by Porphet himself during Ghadir Khumm as the sole interpreter of his legacy, in both political and spiritual terms.
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From a historical viewpoint, after Prophet Mohammed's (PBUH) death in 632 AD, a disagreement broke out between muslims concerning who is the rightful successor of the Prophet. Both Shias and Sunnis have enough evidence to support their ideologies in understanding of the succession. The basis of Sunni ideology was after the death of Prophet we have to follow his teaching which was the sunnah of the Prophet Mohammed (PBUH), and from then on this section in Islam came up who are known as Sunnis which in Arabic means "one who follows the traditions of the Prophet." The strong argument made by Sunnis is that the prophet chose Abu Baqr to lead his congregational prayers, thus suggesting that Prophet wanted Abu Baqr to be the next leader after him. And this thought got more supporters when Umar ibn al-Khattab, a prominent companion of Muhammad, nominated Abu Bakr as the first caliph, and relying on his decision later on many others added their vote making Abu Baqr the first caliph of muslim community and the successor of majority of the muslim world.
Contrasting to this view point, a minority group stood up saying Abu Baqr was only the companion of Prophet Mohammed (PBUH) but cannot be assigned as his successor when his family members are alive, as the minority believed the leadership must stay in the Prophets family to those specifically appointed by him. And this minority is today commonly known as Shias often shortened from the historical term "Shia-t-Ali," which means the party of Ali. Shias are also known as followers of "Ahl-al-Bayt" which means followers of prophet's family. Shias believe after the death of prophet mohammed, leadership should have passed directly to his cousin and son-in-law, Ali. The reason behind this is Shias do not believe in the process of elected religious leaders, instead they believe in following a line of Imam's appointed by Prophet Mohammed (PBUH) himself. Moreover, the strong evidence shia world has regarding the right successor is when Prophet Mohammed (PBUH) stood up in Ghadeer Khumm in front of his Companions on the way back from his last Hajj (hijjat al-wada) and ordered to all the people with him "Man kuntu Maula, fa-haza Ali-yun Maula" which means "For whom I was your leader, Ali is your leader also." This statement by Prophet Mohammed (PBUH) is clear evidence stating that after his death his successor will be Ali.
From a theological viewpoint,