When Prophet Muhammad (peace be upon him) died, the debate over his successor split the community into Islam’s two major schools of interpretation. While the community agreed that Prophet Muhammad (pbuh) could not be succeeded by another prophet as he was the ‘seal of the prophets” (khatim al-anbiya), a successor was needed to lead the community and state. A large group of the community chose Abu Bakr as the successor to the Messenger of God (khalifat rasul Allah), hence the word caliph in Western languages. A small group held that Ali was better qualified than any other candidate to succeed the Prophet. This minority group came to be known as Shi’at Ali, “party of Ali”, or simply as the Shi’a. It is the fundamental belief of the Shi’a that the Prophet had designated Ali as his successor, a designation instituted through divine command and revealed to the Prophet at Ghadir Khumm shortly before his death.
Source: http://www.iis.ac.uk/view_article.asp?ContentID=106472
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