About fifty years ago, Miroku's grandfather had faught with Naraku on a number of occasions. According to Miroku, he heard that each time Naraku appeared to his grandfather, he had a different form. On one occasion, Naraku chose the form of an attractive woman to take advantage of the grandfather's letchery. Miroku's grandfather figured out it was Naraku and took out some ofuda to throw towards him. Before he could throw them, however, Naraku had peirced through the wards as well as his hand... causing the kazana to form. Naraku ran away but Miroku's grandfather caught up with him and Naraku informed him that unless he tried his best to kill him, Miroku's grandfather would be swallowed up by the kazana and the curse would be passed down from generation to generation, eventually eradicating his entire family.
The kazana was passed down to Miroku's father and then to Miroku himself. Miroku has taken on the duty of finding and killing Naraku so that the curse ends and he's come close numerous times but Naraku is still living and the curse still exists.
The kazana, found on Miroku's right hand, is otherwise known as "air rip" and it's quite literally a black hole. It sucks up everything within a certain distance and the older that Miroku gets, the bigger and more powerful the kazana gets. It's a very effective weapon unless the Saimyoushou (Naraku's poisonous bees -- they poison Miroku by flying into his kazana) happen to be around but Miroku isn't too keen on using it very often. He's afraid that the more he uses it, the faster it will grow.
Miroku's fear of using the kazana too often stems from the fact that he witnessed his father's death. Mushin, a Buddhist priest that looked after Miroku, tried to stop him as Miroku ran out to see his father. Being held back as a bright flash of light went off, Miroku saw his father get sucked in by his kazana. Nothing was left of Miroku's father but a large crater outside the temple where he grew up. This bothered Miroku as he knew that this is how he would die unless he managed to kill Naraku and free himself of the kazana's curse.
Still, even if it means Miroku's life span might be shortened, he will use the kazana to protect his friends, which shows his true character very well -- he'd rather risk dying earlier than watching his friends be hurt.