Sunni's are Arab, and the Shiites are Persian.

Disclaimer: I am not a Muslim, so my answer may not be 100% accurate. As I understand it, the two factions arose as a result of a disagreement over who should succeed Muhammad. The Sunnis believed that caliphs should be chosen by a consensus of the Muslim community. The Shiites, though, believed that leadership should be inherited by the caliph's descendants. This happened in 632 A.D., when Muhammad died. A number of other differences between the two denominations have developed over the centuries, but that initial disagreement was what split Islam.

"The schism developed in the late 7th century following disagreements over the religious and political leadership of the Muslim community. Roughly 85 percent of Muslims are Sunni and 15 percent are Shi'a." "Muhammad began preaching Islam at Mecca before migrating to Medina, from where he united the tribes of Arabia into a singular Arab Muslim religious polity. With Muhammad's death in 632, disagreement broke out over who would succeed him as leader of the Muslim community. Umar ibn al-Khattab, a prominent companion of Muhammad, nominated Abu Bakr, who was Muhammad's intimate friend and collaborator. Others added their support and Abu Bakr was made the first caliph. This choice was disputed by some of Muhammad's companions, who held that Ali ibn Abi Talib, his cousin and son-in-law, had been designated his successor. Abu Bakr's immediate task was to avenge a recent defeat by Byzantine (or Eastern Roman Empire) forces, although he first had to put down a rebellion by Arab tribes in an episode known as the Ridda wars, or "Wars of Apostasy"." "His death in 634 resulted in the succession of Umar as the caliph, followed by Uthman ibn al-Affan and Ali ibn Abi Talib. These four are known as al-khulafā' ar-rāshidūn ("Rightly Guided Caliphs"). Under them, the territory under Muslim rule expanded deeply into Persian and Byzantine territories. When Umar was assassinated in 644, the election of Uthman as successor was met with increasing opposition. In 656, Uthman was also killed, and Ali assumed the position of caliph. After fighting off opposition in the first civil war (the "First Fitna"), Ali was assassinated by Kharijites in 661. Following this, Mu'awiyah, who was governor of Levant, seized power and began the Umayyad dynasty. These disputes over religious and political leadership would give rise to schism in the Muslim community. The majority accepted the legitimacy of the three rulers prior to Ali, and became known as Sunnis. A minority disagreed, and believed that Ali was the only rightful successor; they became known as the Shi'a. After Mu'awiyah's death in 680, conflict over succession broke out again in a civil war known as the "Second Fitna". Afterward, the Umayyad dynasty prevailed for seventy years, and was able to conquer the Maghrib and Al-Andalus (the Iberian Peninsula, former Visigothic Hispania) and the Narbonnese Gaul} as well as expand Muslim territory into the Indian subcontinent. While the Muslim-Arab elite engaged in conquest, some devout Muslims began to question the piety of indulgence in a worldly life, emphasizing rather poverty, humility and avoidance of sin based on renunciation of bodily desires. Devout Muslim ascetic exemplars such as Hasan al-Basri would inspire a movement that would evolve into Sufism." Source and further information: http://en.wikipedia.org/wiki/Islam#History Further information: http://en.wikipedia.org/wiki/Sunni http://en.wikipedia.org/wiki/Shia_Islam http://en.wikipedia.org/wiki/Historical_Shi%27a-Sunni_relations http://en.wikipedia.org/wiki/Muslim_history