Unfortunately, the exact origin of Aikido and the forms that serve as it's foundation are not documented reliably, so there are several popular theorys, or versions that circulate today. From extensive research, the following accounting appears to be a reasonable conclusion.

Yorimitsu Minamoto

In it's earliest form, it is believed that the term Aikido was first used by a well known Samurai named Yoshimitsu Shinra Saburo Minamoto of Teseiwagenji han, approximately 900 years ago. It is said that Yoshimitsu dissected and analyzed the bodies of criminals and war dead at Daito Mansion, and with this understanding of body and skeletal mechanics based the Daito ryu style of jujutsu. Yoshimitsu passed the art to his son Yoshimitsu Yoshikiya, who later moved to Takeda region of Japan. the family resided in Takeda (Kai province) from the 1500's to the late 1800's and assumed the family name of "Takeda".

Minamoto No Yoriyoshi

Takeda Sokaku and The Daito Ryu influence on aikido

Originally, Aikijutsu had been developed as a combat art based primarily on the Toso techniques (sword and spear) to be used on battlefields against other Bushi (soldiers) wearing armor. At the time, Jujutsu was practiced as a secondary study. Within Jujutsu was a second level of training called Aiki no jutsu (Aikijujutsu) that was reserved for the higher ranking Samurai. The Jujutsu Techniques could be used offensively, while Aiki no jutsu was strictly a defensive art. The techniques evolved with the needs of the times and were handed down eventually to the Takeda family in Kai province as a "gotenjutsu", or martial arts for use inside a palace, and later, Takeda Kumitsugu passed the teachings to the Aizu han (clan). After Daito ryu passed to Aizu han, the top retainers, lords and generals need Aiki no jutsu (also called "oshikiuchi". There is some question as to whether or not this term refered to the martial techniques or to ways of ettiquette) as a means of self-defense inside the Aizu castle (seen mostly as suwariwaza and hanmi handachi). Masayuki Hochina, an instructor of the fourth Tokugawa Shogunate at Edo castle, is said to have completed development of Oshikiuchi, which was later combined with Takeda family Gotenjutsu in the Meiji period to become modern day Daito ryu.

Sokaku Takeda

"The purpose of this art (Daito ryu) is not to be killed, not to be struck, not to be kicked, and we will not strike, will not kick, and will not kill. It is completely for self-defense. We can handle opponents expediently, utilizing their own power, through their own aggression. So even women and children can use it. However, it is taught only to respectable people. It's misuse would be frightening..." -- Takeda Sokaku

Takeda Shingen

Takeda Sokaku was raised in the Meijo era (1868-1912). During this time, major changes were occurring (The Meiji restoration) throughout Japan that involved the assimilation of western ways and the expansion of international trade agreements, as well as the elimination of "Samurai" status, to insure that all people would be treated equally. Among changes made during the Meiji restoration was, in 1876, a ban on the wearing of swords publicly. Seeing the effects of these new changes, Takeda Sokaku understood that there would be a need to modify the emphasis of Daito ryu jujutsu (techniques of kuminchi were known as "Daito ryu Jujutsu" until about 1922. Research indicates that "Aiki" was added later at the suggestion of Omoto-Kyo leader, Deguchi Onisaburo) from that of primarily being a Kenjutsu (sword) based art, to Aikibujutsu; which focused more on Taijutsu (unarmed techniques). As a result of these changes, and Sokaku's willingness to spread this previously guarded art form to the general public, the revised Daito ryu became very popular and Sokaku was crowned with the success of his idea. As an interesting side note, Takeda Sensei preferred to travel throughout Japan teaching to groups of students at a time (where he is said to have demonstrated techniques to his students, rather than actually instruct in great detail) and never settled in a single dojo for any great length of time. According to his extensive enrollment books, records indicate that Takeda taught as many as 30000 students throughout his life.

Takeda Shingen

Morihei Ueshiba's "Takemusu Aikido"