It has nothing to do with one sect being more liberal or fundamentalist than the other. Some sunnis are liberal in their interpretation, some are conservative. Some shi'ites are liberal in their interpretation, some are conservative. The differences are rooted in the greatest tragedy in Islamic history from which the two sects' belief systems emerged. Upon Muhammad's death, the issue of successor arose, and there were those who believed that only members of the prophet's family were worthy. The following three Caliphs were not related to the prophet (except through marriage), until the 4th Caliph was elected, Ali, Muhammad's cousin. The 3rd Caliph Othman, had been assasinated by way of 10 murderers from 10 seperate tribes. It was in such a way designed so that retaliation would be nearly impossible. It was in this way that the first major rift in Islam was created - the supporters of Ali believed that it would be costly to pursue Othman's murderers and it would be more important to keep the Muslim state in unity while the followers of Muawiya believed Othman's murderers should be brought to justice. The Battle of the Camel ensued. After that, Muhammad's grandson, Hassan, was Caliph for I think a few months. He soon gave it up to Muawiya. After that came Muawiya's son, Yazid, one of the most despised figures in early Islamic history. Ali's other son, (Muhammad's grandson) Hussein and a vast number of his supporters were then slaughtered in Karbala, Iraq. This event is mourned by the Shi'ites. It is from Ali's family that the Fatimid Dynasty stemmed and if memory holds correctly, Muawiya's line that the Sassanid Dynasty came.
