At Ichijogi, Chris Hellman, the author of The Samurai Mind posted a very good article on the history and background of iaido. An excerpt is below. The full article may be read here. Please pay a visit.
The art of iai seems to be one of the most understood of the Japanese martial arts. It dates from at least the 16th century, and probably before that, and yet it falls into that uncomfortable ground of not being quite one thing or another. Is it for use in combat, or is it primarily a tool for self-discipline?
Of course, the comparatively modern discipline of iaido has as one of its stated aims the refinement of the character of the practitioner, but there is some contention about the whole discipline, based largely on the fact that the principle form of practice involves starting in a kneeling position known as seiza. Given the importance of this position in most forms of iai, it has always been something of a mystery as to how it developed.
Although iaido (and some more traditional styles as well) are quite far removed from their ostensible purpose, i.e. drawing the sword, cutting down an opponent and returning the sword to its sheath, the direction in which it has developed – as a tool for polishing the self – does, in fact, owe something to elements that were an important part of the practice from the start.
Along with the physical practice of wielding the sword, it has a mental component that is vital – one might even say it is the basis of iai.
The ability to influence the opponent, to control him, before coming to blows, is at its heart, as earlier practitioners were keen to point out:
The founder of the Suio ryu, Mima Yoichizaemon Kagenobu wrote in the early 1600s: