It is widely believed among Sunnis that the name Sunni derives from the word [Sunnah] which represents the prophet Muhammads manner of conduct. Some have argued that "Sunni" actually means or is derived from a word that means "a middle path" refering to the idea that Sunnism is a more neutral position than the percievedly more extreme viewpoints of the Shias and the Kharjites.
In Islam political disagreements have usually manifested themselves as religious disagreements; the earliest example of this is that 30 years after Muhammed's death, the Islamic community plunged into a civil war that gave rise to three sects. One proximal cause of this first civil war was that the Muslims of Iraq and Egypt resented the power of the third Caliph and his governors; another cause was business rivalries between factions of the mercantile aristocracy. After the Caliph was murdered, war broke out in full force between different groups, each fighting for power. The war ended with a new dynasty of Caliphs who rules from Damascus.
One of the groups to evolve from this conflict was the Sunnis. They hold themselves as the followers of the sunna (practice) of the community as a whole. They were willing to recognize the authority of the Caliphs, who maintained rule by law and persuasion, and by force if necessary. The sunnis became the largest division of Islam.
Two smaller groups also were created from this schism: The Shi'ites and the Kharijites (Khawarij), also known as the seceders. The Shi'ites believed that the only legitimate leadership rested in the lineage of Muhammed's cousin and son-in-law, 'Ali. The Shi'ites believed that the rest of the Muslim community committed a grave error by electing Abu Bakr and his two successors as leaders.
The third group that came into being, the Kharijites, or the Khawarij (seceders) originally supported the Shi'ite position that 'Ali was the only legitimate successor to Muhammad. They were disappointed when 'Ali did not declare war when Abu Bakr took the position of Caliph, believing that this was a betrayal to his God-given legacy. Ali was later assassinated by the Kharjites with a poisonous sword.
Basis for theology
Sunnis base their religion on the Quran and the Sunnah, which is recorded in the books of hadith. The hadith collections of Sahih Bukhari and Sahih Muslim are considered by sunnis to be the most authentic and most important hadith collections. In addition to these two books, sunnis recognise four other hadith books to be of sound authenticity (though not as high as Bukhari and Muslim), together they are called "The Six Books" or the Kutubi-Sitteh.
The four sunni schools of thought (madhabs), the Hanafi, the Shafai, the Hanbali and the Maliki apply slighty different reasoning when deducing Sharia, or Islamic law, from the hadith, but they all mutually recognise eachothers methods and conclusions (even where they differ) as logically sound and equally acceptable alternatives.
View on other groups
There is no unanimous viewpoint on Shia among Sunnis. Some sunnis insist that "only the four madhabs" are acceptable viewpoints. Others maintain that Shias (specifically the Jafaryia or The Twelvers) can be considered a "fifth madhab" that is acceptable. This latter viewpoint is supported by a decree from the prestigous Al-Azhar university in Egypt.
Groups like the Nation of Islam, Ahmadiya, Ismailis are considered to be heretical by the majority of sunnis, and thus outside the fold of Islam.
Beliefs
External link on Sunnite beliefs: Beliefs of the Ahl us SunnahHistory
Theology
(this section can be substantially expanded)