Midoriko

was an extremely powerful priestess who created the Shikon no Tama in order to eliminate the wicked demon-of-demons Magatsuhi. Once in doing so, she had forced out not only Magatsuhi's demon spirit, but her own soul as well, which is the Shikon Jewel. She represents the purity of the Jewel called Naohi.

History
Midoriko lived centuries before the events of the series, when the shoguns served as de facto rulers over most of Japan. As a priestess, she was well known for her vastly strong spiritual abilities, more specifically her ability to purify demon souls and spirits, rendering them completely powerless. It was because of this ability that Midoriko was both hated and feared by demons.

In her final battle, Midoriko was ambushed by many yōkai. The battle lasted for seven days and nights and eventually a yōkai (created when many yōkai possessed a mortal man who secretly desired Midoriko, à la Naraku) captured her in its jaws. Midoriko, in one final attempt to defeat the yōkai, pulled its soul into her body—fusing it with her own soul—and then expelled them both simultaneously. Both yōkai and Midoriko died, but their souls combined to give birth to the Shikon no Tama. Midoriko and the demon remained imprisoned within the Jewel and continued to battle ever since.

During the Story
Although many years have passed, her body exists (in crystallized form in the anime, as a mummy in the manga) in the Yōkai taijiya village. She was first seen when Sango explained to the group how the Jewel was created. She made a cameo, in which she saved Myōga (however, it could just have been Myōga seeing things).

Midoriko's soul is later called upon by Kikyō to help purify her wounds from Naraku after they had re-opened. Kikyō figured that since they were alike souls in the sense that they were both miko who fought yōkai and wanted the jewel to be purified that she would help Kikyō. After Kikyō's wounds were successfully healed by Midoriko's power, Midoriko herself was able to erect powerful barriers to prevent Inuyasha's group from following Kikyō and Kohaku (who through his jewel shard she ordered to go after Naraku).

Midoriko begins to enact her will in Kōga's shards and regularly stops his legs from moving in order to allow him to be captured by his enemies like Mōryōmaru and Naraku in an attempt to purify them. In Kikyō's final battle with Naraku, Midoriko remotely purifies Kōga's shards so that when Naraku captures him in the battle Naraku would take the purified shards in and then Kikyō could do her part and purify the jewel and Naraku at once. However Naraku noticing the effect the purity of Kōga's shards had on his body even when he slightly touched him gave him enough reason to hide his jewel in Kikyō so that when he fully took the shards once he captured him he wouldn't be purified which unfortunately worked. Once Kikyō's final plan was defeated and she died at Naraku's hands it seemed that the plan had failed. Except for the small light in the jewel and Kohaku's shard which still remained.

When Inuyasha entered the jewel, he finally saw Midoriko herself and witnessed her fighting and defeating a huge amount of demons then disappearing.

At the end
In the manga, most likely Naraku/Magatsuhi's desire had dissolved forever her soul in order to prepare the place for Kagome, because she come to help Inuyasha against the demons but then disappeared and never returned.

Instead, in the anime series, after Kagome makes her wish to destroy the jewel and also stop its plan to replace Magatsuhi and Midoriko with Naraku and herself, Midoriko ceased her fighting and disappeared along with the demons she fought, implying that her battle had finally ended and she was allowed to move on to the afterlife.

Powers & Abilities
Immense Spiritual Power: Midoriko is perhaps the most powerful priestess shown in the entire series possessing extremely high levels of spiritual power, strength and energy as she is the representation of the purity in the Shikon no Tama. She was also said to be greater than any priest/priestess and generals in her time. In fact Kikyo had specifically sought to obtain Midoriko's soul in order to completely destroy Naraku due to the strong powers she has over the Shikon Jewel. Master Swordswoman: Due to the endless battles and wars she had experienced, Midoriko had become a skilled swordswoman, able to ward off a multitude of demons with a single blow. Her swordsmanship led her to have the strength and power equal to one hundred samurai according to lore.
 * Shikon Jewel Influence: As Midoriko is the good and purity of the Shikon Jewel, she has some influence and control over the jewel and its shards that can be exerted into the living world even if she has long died. Her influence over the jewel was so great that the collective power of the wolf tribe ancestors was only able to temporarily override her control of Kōga's jewel shards.
 * Immense Purification: Her purification abilities are said to be capable of purifying hundreds to thousands of demons all at once and possesses greater strength than any other priest/priestess. This is shown when her powers were able to completely purify Naraku's miasma when Kikyō fused Midoriko's soul unto her body to heal the miasma inflicted wounds that Naraku inflicted upon her body while Kagome's purification can only temporarily heal them.
 * Barrier: Midoriko has the ability to create very powerful barriers, even though she was within the Shikon No Tama she was still be able to maintain the barrier on the entrance of the cave (Anime only) where the Shikon no Tama was created. The strength of her barrier is able to easily withstand the barrier-breaking Red Tessaiga (Manga Only). The barrier she has within the cave is also capable of physically expelling anyone who displays a selfish desire for the jewel straight out of it. This is shown when Inuyasha boasted about obtaining the jewel to become a full demon which cause him to be thrown out of the cave which Shippo likens to being Midoriko's version of the Beads of Subjugation.Midoriko Creating the Jewel.png
 * Shikon: Midoriko's most fearsome and powerful ability was to excorsice shikon. One's spirit is made up of four souls in Naohi (直霊): Aramitama (荒魂, Courage), Nigimitama (和魂, Friendship), Kushimitama (奇魂, Wisdom) and Sakimitama (幸魂, Love). Midoriko contained these four spirits at their maximum and balanced, giving her the ability to drive out the soul of anything and purify it. She mainly used it on demons which left them powerless. It was this ability that Midoriko used to defeat Magatsuhi and create the Shikon no Tama.

Immense Endurance: Midoriko had extremely high stamina as she was able to fight many demons (who had all merged into one single demon named Magatsuhi) for seven days and seven nights without any rest. It was even shown that she had managed to defeat him after losing her left arm and being impaled by his tentacles with little reaction.

Weapons

 * Samurai Armor: Midoriko is shown to wearing samurai armor over her priestess attire when she fought against the many demons that eventually merge into Magatsuhi. Though she only seems to wear the chest plate, shoulder plates, and skirt portion of the chest plate.
 * Sword: She is seen carrying and using a large sword as her main weapon. It doesn't seem to have any special abilities outside of being an excellent medium for her spiritual powers.
 * Purification Slash: Midoriko can imbued the sword with her strong spiritual powers that when slash can purify hundreds upon hundreds of demons in one sweep.

Anime vs. Manga

 * It is hinted that Kirara fought by Midoriko's side in the anime, while in the manga, no such suggestions were made.
 * In the manga, Midoriko's fate after Kagome made her wish for the jewel to disappear forever was never shown, but most likely Naraku's evil desire had already dissolved forever her soul to prepare the place for Kagome. However, in the anime series, after Kagome makes her wish, Midoriko ceased her fighting and disappeared along with the demons she fought, implying that her long battle has finally ended and she is allowed to move on.
 * In the anime, Inuyasha, Kagome, Shippō, Miroku, and Myōga are unable to enter the cave and they can only get in after Sango tells them how. In the manga, they are able to walk in without her.

Trivia

 * Midoriko probably lived somewhere between 1203 and 1333 when the shoguns and their shikken regents were at the peak of their power.
 * Despite being responsible for the whole story of InuYasha (she was responsible for the existence of the Shikon Jewel), she has a really minor role in the actual story.
 * In the fourth movie, InuYasha: Fire on the Mystic island, the clothing that the fake Kikyō is wearing looks pretty similar to Midoriko's clothing.
 * Midoriko is the only priestess shown in the story that wields a sword (not counting the Kikyō that appeared in the fourth movie, as she was a clone).
 * How her name pronunciation is changed in the English Dub of The Final Act; in the original series, it was pronounced "mee-door-e-ko", now it's pronounced "meed-oh-ree-ko".