Only the discovery of fossil fuels would make two countries argue over what had previously been described as "terra nullius" (vacant territory), and "barron rocks". The Senkaku Islands are made up of 8 land masses... five uninhabited islets and three rocks. What lies underneath is what makes them suddenly so interesting.
The islands lie 120 nautical miles west of Okinawa and North East of Taiwan. The dispute is primarily between Japan and China but China needs the proximity and history of Taiwan to bolster it's claim so Taiwan is part of the dispute by proxy.
The earliest recorded reference to the Islands seems to come from China. There is even a Japanese map that shows the islands as Chinese territory. Japan claims the islands as spoils from the 1895 Treaty of Shimonoseky it signed with China after the First Sino-Japanese War. China's claims originate from the Treaty of San Francisco which was signed by Japan and the Allies after World War II and rendered the Treaty of Shimonoseky null and void.
After WWII, the United States administered the Senkaku Islands until 1972 when it handed administrative control over to Japan along with Okinawa. China's (and Taiwan's) renewed interest in the islands started in 1970 (coincidentally just two years after the potential for oil was discovered). The dispute continues and the islands have had a regular presence in the news as an Asian flashpoint. The United Nation's "Law of the Sea" gives nations control over a 200 nautical mile "exclusive economic zone" (EEZ) surrounding their territory. EEZ's include seabed and submarine resources like oil and natural gas. The border in the lower right and encompassing everything above it on the map is China's EEZ claim and extends out from Taiwan's border to the south-west. The border in the top left is Japan's EEZ claim and extends out from the (undisputed) islands in its Okinawa prefecture.
Not willing to wait till the matter is formally resolved, China built a natural gas drilling platform outside of Japan's claimed territory but which is capable of drilling into the disputed area to extract gas. Skirmishes and posturing continue including altercations between Chinese, Taiwanese and Japanese ships circling the islands to assert their claims.
Although Senkaku is the Japanese name for the group of islands, China refers to them as the Diaoyo Islands. Diaoyu and the Japanese name for Uotsuri, the largest island translate as, "Fishing".