Okuri was born around the same time as Itachi (in fact they were on the same ANBU squad), with the 7 tailed wolf sealed up inside him. He's actually Kiba's older brother (although he never had his own dog, they shared Akamaru) and he even once gave a cup of his own blood to both of them to save their lives. Although he never tapped into old 7 tails, he was basically the only ninja comparable to Itachi. It was impossible for him to use any jutsu, but he was capable of using advanced level taijutsus from his family.
When Itachi wiped out the Uchiha clan, the next thing he did was attempt to kill Okuri, as he was the only one capable of tracking and hunting him down. However, this activated the chakra of the seven tails, and the ensuing battle saw Itachi fleeing. Okuri could not follow because his entire family, who had long planned for the day he let the demon within out, was trying to kill him. Most of them, including his father, die trying. Even the assistance of the Hyuuga clan is not enough. When the sun rises, Okuri resumes his human form and is horrified. He knows he must leave, or else he will hunted down and only more death will follow. Before he leaves the Leaf behind him forever, he tries to explain what happened to Kiba, but he is too young to understand.
Okuri shouts to the world that his no longer Inuzuka, but Okami. He flees to the land of Ice, where the power of the Seven Tailed Wolf is Equal to, if not greater than, that of even the ninetails. However, the chakra of the seven tails can only be used at night, else it will cause the wind to tear the flesh from Okuri's bones. As a solution to this, Okuri lets the seven tails transform his body and soul into that of a half demon. As a result, his own chakra supply is distinctly inhuman, and using the seven tails chakra will turn his body full demon. However, the transition caused him much mental stress, and cost him the ability to feel true love. To maintain his sanity, he took up bushido, and after a few years, declared himself a samurai. However, after learning he would need to follow the current shogun, he claimed to be nothing more than a ronin. Taking a fair chunk of land on the north side of the continent, he decided only he could be master of himself, and that he was the only master of self, therefore the only one qualified to be shogun.
Several years later (Shippuden), he is reunited with Kiba and Akamaru, who are now the only surviving members of the Inuzuka clan. After explaining what happened on the day he left, he offers a Kiba and Akamaru a deal: Stay here with me, accept my name, give me your ultimate loyalty, and I'll make you into half demons as well. They accept. With his brethren at his side, he soon kills the shogun and takes the title for himself.
