Shin-ra discovered Mako Energy and use it as a power source. What it really is, is the spirit energy of the planet. Shin-ra built reactors to harness the energy and compress it into the susbstance known as Mako Energy. Members of soldier get lightly showered with this energy to make them better fighters. It is known to give a strange glow to the eyes. Too much energy however could turn a human into a monster, this is what the scientist Hojo was experimenting with. Condensed Mako Energy forms into materia over time. This is why materia is found around old reactors.

 

(Creature created from Mako exsposure)

 

Once again Hojo was experimenting but this time not with Mako Energy but the cells of an alien creature known as Jenova. Prof. Gast discovered the creature after it was sealed away by the ancients. This creature fell from the sky back when the ancients or cetra ruled the planet. It terrorized it, it's job being to destroy the planet then move on to another but the ancients were able to seal it away. After Prof. Gast found Jenova he took it back to the shin-ra lab. Hojo injected some of Jenova's cells into Sephiroth which made him even more powerful and not likly to die easily. Since...a variety of Jenova creatures have been formed.

 

(Jenova-Death)