The WWE Brand Extension had its roots in the purchase of World Championship Wrestling by the World Wrestling Federation in March of 2001. WCW was floundering, both in ratings and in finance, and WWE head honcho Vince McMahon swiftly purchased the company's tape library and trademarks, in addition to signing many of WCW's stars. The plan was to have a long awaited Invasion angle, with a war between the WWF and WCW. The angle, which had been eagerly awaited for years, was an utter failure, for a multitude of reasons, such as bad writing, WCW being unable to gain it's own identity, and the WCW stars being made to look weak in comparison to the WWF stars.
The plan was to eventually give WCW their own television show and pay-per-view events. When the angle tanked, the WWF was left with a bloated roster, with a far too many characters for fit in their television shows. As a solution to this, the WWF braintrust decided to split the roster between their two flagship shows, which they billed as a "brand extension". The roster would be split, with half of the characters only appearing on WWF Raw, and the other half only appearing on WWF Smackdown. Vince McMahon was in charge of WWF Smackdown, while Ric Flair, the storyline half owner of the WWF, was given control of WWF Raw. A draft was held to split the roster between the two shows. The WWF was renamed World Wrestling Entertainment shortly after the split.
The split was flawed from the start. First, the WWF Champion would float between the two shows, as would the WWF Women's Champion. Second, characters would leave their show for the other without explanation. Third, the shows were very similar to one another, with Ric Flair and Vince McMahon both playing "heel owners and feuding with the virtuous babyfaces.
Upon the departure of Stone Cold Steve Austin from WWE, Flair was hastily turned babyface again and lost a match to McMahon in which McMahon regained full ownership of WWE. After a couple weeks of appearing on both shows, McMahon announced former WCW President Eric Bischoff as the storyline general manager of Raw, while Stephanie McMahon was named the GM of Smackdown. It was only then that the shows gained their own identity, with their own titles anc champions. Raw became a show focused more on storylines, while Smackdown, with such stars as Kurt Angle, Chris Benoit, and Eddie Guerrero, became the show to watch for great pure wrestling. In addition, it finally seemed as if the two shows were feuding with each other.
Of course, some problems still persist. There were still several unexplained jumps between the two shows, as wrestlers would show up on Raw or Smackdown without explanation. Plus, with most of the good wrestlers on Smackdown, Raw was stuck with a thin roster of dependable in ring performers, while Smackdown generally delivered an amazing show every week. Plus, on the Halloween 2002 episode of Smackdown, Eric Bischoff showed up in costume, dressed as Vince McMahon, and kissed Stephanie McMahon, who seemed to enjoy it, despite kicking Bischoff in the nuts on a pay-per-view event just a few weeks prior.
Despite these problems, the WWE Brand Extension is finally starting to come together, with each show delivering decent to great shows every week.