In Brazil, in the early 20th century small side show fights began to gain popularity at circuses and other gatherings. Called Vale Tudo it pitted two fighters against each other with minimal rule, the earliest documented example is in 1928.
Boxers, Capoeira practitioners, Luta Livre (freestyle) fighters, and then in the 1930s, Brazilian Jiu-Jitsu fighters.
When Mitsuyo Maeda brought the recently streamlined Japanese art of Judo (at the time called Kano Jiu-Jitsu, for more on the History of Jiu Jitsu) and began instructing the Gracie family, the Gracies wished to test their skills.
These Vale Tudo matches do not much resemble modern MMA matches and where not considered a "sport" in themselves. Often for the crowd it was purely for entertainment, while the fighters sought to test themselves and their skills. It was the perfect venue for the Gracies to continue to grow and refine their skills.
Now if your wondering why this article seems to focused on the Gracies, it is because it is impossible to tell the story of Mixed Martial Arts without the Gracies, so ingrained are they to birth of the sport.
Vale Tudo match rules varied from fight to fight, some had next to no rules while others where little more than mixed grappling events. The only method of victory was to finish the other fighter, so events that did have set time limits ended in draws if that limit was reached.
It was a baptism by fire for MMA's first family, the perfect venue for them to hone their skills, and all the time larger and larger crowds gathered to watch the Gracies fight.