Karate Comes to Japan
In its drive towards modernization and in pursuit of a foreign policy that would win it colonial possessions similar to those of the main European powers, Japan introduced a draft requiring male Japanese citizens to serve for a period of time in the military in 1873. This draft now included the Okinawans. While undergoing mandatory medical testing two men in particular stood out as exemplary specimens of fitness: Hanashiro Chomo and Yabu Kentsu. After some investigation it was discovered by the military authorities that these men enjoyed a superior physique and level of endurance through their practice of karate.

Hanashiro Chomo

Yabu Kentsu
Despite positive first impressions though, the Japanese military finally abandoned the idea of introducing the art as a discipline for recruits owing to the apparent lack of organization, impractical training methods and the time commitment needed to develop sufficiently. While not officially endorsed by the military then, karate was from this period taught in schools, possibly with the ulterior motive of conditioning teenagers to be able to better serve their country when drafted, but at the very least to be more productive in Japanese society.
The famous master Itosu Anko led this movement along with other notable characters in the evolution of the Okinawan fighting art. A trade-off was required that would have a lasting impact on the development of the art: for karate to become more widespread and popular the emphasis in training had to be changed. Removing hard core self-defense applications in lieu of teaching children, the new generation of masters introduced the group practice of kata to promote physical well-being. The original bunkai, or combative applications of the kata movements were all but lost until the close of the twentieth century when the 'secrets' began to be revealed and taught once again in conjunction with the kata.

Master Itosu Anko
Itosu Anko was a defining force in the formulation of modern day karate. He created and taught the Pinan kata; simplified patterns of movement derived from the longer and more complex traditional kata. These kata were later changed by Funakoshi Gichin to become the Heian kata. Both the Pinan and Heian kata are still taught today and are among the first kata students from around the world will study and learn.

Master Funakoshi Gichin, a principle architect in the modernization and popularization of karate, leads his students in group kata practice.
It was this new form of fighting and training that was principally introduced to Japan and made popular by Funakoshi Gichin. His students, upon completion of a later new dojo, named the training room the Shoto Kan - or Shoto's Hall - and thus the first Japanese style was born: Shotokan.
Japanese Karate
Japan of course already had a rich history of martial arts and, as noted above, the traditional arts of kenjutsu and jujutsu had both already morphed into kendo and judo respectively. These arts were organized and well represented. To become popularly accepted karate would have to emulate these arts.
This move towards a level of standardization acceptable to the Butokukai (the National governing body for Japanese martial arts) saw many changes including the establishment of a training uniform (the gi), the use of a standardized curriculum and the use of kyu and dan gradings to reflect a student's progress within that curriculum, and the introduction of a sporting element. One of the biggest changes though was the name itself.

Dai Nippon Butoku Kai
China Hand Becomes Empty Hand
Owing to the increasing level of nationalism in Japan in the 1920s and 1930s especially China and Chinese people in general were denigrated. Originally karate was made up of two ideograms. The second (te) was and would remain read as 'hand'. The first ideogram though (pronounced 'tou' or 'kara') referred to China's Tang dynasty and was taken to mean 'China'. Karate (or toudi depending on who was speaking) meant 'China Hand'.
in 1905 Hanashiro Chomo wrote a book and used, for the first time, a different way of writing karate. The first ideogram was now read as 'empty' (though with the same pronunciation in Japanese). Hanashiro Chomo therefore read the name of the art as Empty Hand.
Later Funakoshi Gichin studied Zen at Engakuji Temple and expanded his understanding of the ideogram 'kara' (empty) and took it back to its Buddhist origins. For Funakoshi the meaning of 'kara' also embraced the Buddhist idea that there was no thing (mu - nothing) in the Universe and by extension no duality. Through Funakoshi in particular the latter reading of karate became popular and this reading has been perpetuated.

Memorial dedicated to Funakoshi Gichin at Engakuji, Kamakura.
The final part of the inscription reads:
Ken Zen Ichi
The fist and Zen are one
This shift in reading wasn't immediately popular in Okinawa and it was sometime later (1936 in Okinawa as opposed to 1933 in Japan) that the new reading was officially ratified. A reading of this article on the history and development of the art reveals clearly that this Okinawan fighting method was much more than a simple inheritance of Chinese martial arts techniques. Up until the 1920s/1930s toudi had been influenced by indigenous fighting arts, skills from Japanese warriors arriving in the Heian period (794-1185), and then later by the Jigen ryu of the Shimazu clan, along with Chinese martial arts. All of this was tested and refined for combat effectiveness in local wars up until the reign of King Sho Hashi who both brought about relative peace and whose ancestor banned, at least legally if not practically, the private ownership of weapons. Then, later, upon adoption by the Police on Okinawa, the art had to tested once again for its pragmatic ability to subdue a criminal. Clearly to have called the art China Hand (and thereby imply that it is solely Chinese in origin) was misleading. The exception to this was the Naha te / Goju ryu strand which most definitely did originate solely from China.

While the ideogram 'kara' was being read in a new way the art also became officially a 'do' as in judo and kendo. 'Do' means a way or a path and carries with it, in my opinion, three meanings. First karate do should be seen as a way of life that will (second) bring the practitioner into contact with the Universal Do (Tao or Dao in Chinese - thereby relating the art also to Taoism) at which point (third) the art becomes a means of expressing that harmony with the Universal Do. With the change in name from toudi jutsu to karate do a deeper spiritual meaning to one's training was established.
Following defeat in World War Two the Japanese martial arts were for a short time banned completely. Karate didn't suffer such great oppression as it could be described as (and understood by the occupying forces as) a form of boxing. Shorn of all militarism the first non-Japanese students began training (American servicemen) and the JKA (Japan Karate Association) was established teaching Shotokan. The JKA organized an instructor's program and eventually sent out the cream of its cadre around the world to spread the art. Sensei included such luminaries as Nishiyama Hidetaka, Asai Tetsuhiko, Kanazawa Hirokazu and Enoeda Keinosuke. Other teachers of other styles followed this example and the exchange was facilitated when foreign students began traveling directly to Japan to train in the top dojo (the honbu). As these foreign students themselves became accredited teachers the art was able to spread further and nowadays you can find a formal or informal dojo in most populous areas in any first world country. Karate has quickly become a very popular form of self-defense, a sport, a method of keeping fit, an academic subject and a spiritual discipline for millions of people worldwide.