Kikyo was a preistess 50 years ago who could see The Jewel of Four Souls. The Demon Slayers didn't know what to do with the jewel so they sent it to someone who could protect it... someone like Kikyo. First many demons (including the dark priestess Subaki) tried to steal it... but all in vain. Inuyasha came around trying to use the jewel to turn into a fullfledged demon. Kikyo spared his life even thought countless times he tried to steal it. Then Inuyasha saves Kaede and they soon fell in love.
An evil, injured, criminal named Onigumo was hidden in a cave outside of town (because Kikyo was so kind) she took care of him and nursed him back to health. Onigumo soon fell for the priestess also and wanted nothing more than too have her for himself. Troubled by the problems of immobilazation he called to the demons to devour his body and soul to give him their power and in that event... Naraku was born.
Inuyasha and Kikyo were planning to meet to exchange the jewel so Inuyasha could become human and live life with Kikyo. But Naraku stealthly had them fight each other causing Kikyos death and Inuyasha pinned to the tree. With Kikyo's death, she was reincarnated (with the jewel) into Kagome.