Midoriko was a very powerful priestess whose spiritual power alone was stronger than any other living persons. It was said that she could purify and destroy 10 demons at once. Once, after seven days and nights of fighting, she realized that she would not be able to win her battle. Her final enemy was one whose life had been created by many demons joined to an evil human heart. When she realized that she would not win, she was drawn into the creatures body, seizing it's spirit and binding it with her own, killing both of them in the process and creating the Shikon Jewel. The jewel contained her soul, as well as the souls of the demons she bound to herself. The souls inside the jewel still constantly battle, and this is why the power of the Jewel depends on who is in possession of it. Her mummified body is found in the exterminator village. It is hinted that Kirara fought by Midoriko's side in the anime, while in the manga, it had made no hints toward this. (Source: Inuyasha-Fan.com)