So Tetsuma explains! Some history: there used to be an Emperor, who granted land and noble titles to generals in his army. The land and title were linked to military service; you didn't send troops to fight in the Emperor's wars, you didn't get to keep your land. Then the daimyo started arguing among themselves, then started fighting, and then the most recent Emperor died without an heir, and it kinda became a free-for-all. The shinobi had been military clans of exceptional individuals within the system. Instead of noble titles, they asked for things like political influence, money, and the right to live on a specific daimyo or lesser lord's lands - you'd generally see specific lords associated with specific clans. Daimyo and the lesser lordships are all hereditary rulers, but anyone who seizes enough territory can arguably declare themselves lord of it.
The shinobi also started fighting among themselves, so now all the clans are doing their own thing, which usually involves competing for limited work and places to live. Some of the weaker clans have associated with stronger clans, and there are alliances. The Senju (Tetsuma's clan) are the leaders of one of two major factions in their area. The fighting's been really bad lately. Boys usually go out to fight pretty young, and do military-type missions, while girls train as kunoichi - specializing in healing, assassination, and sometimes guard work.
...There are also monsters, ranging from minor spirits to the Tailed Beasts, which show up every decade or two to destroy a couple square miles then vanish.