Several centuries before Inuyasha's seal was broken, there was a very powerful miko named Midoriko. She used her spiritual powers to fight demons and bad spirits by purifying their souls.
One day, Midoriko was attacked by many demons and fought them for 7 days and nights. On the final day, the strongest demon caught her in its jaws. Midoriko knew she going to die, so she used her powers to pull all of the demons' souls into her own soul and eject them out of her own body. What came out of her chest was the Shikon Jewel, which contained her own soul and all the demons' souls.