The reasons for this conflict are mutli-fold.
1. You have some Muslims who believe that using violence outside of state control in the name of Islam is legitimate. To them, targetting people they consider "heretics", that is, those who are practicing the religion in a "wrong" way, is completely legitimate.
2. Iran right now is trying to gain hegemony over the Persian gulf. Iran's policy is the export of it's revolution, and Iran is well aware that the worlds economic well being flows through the gulf. Therefore, Iran wants to topple the governments on the Arabian peninsula and has the long range goal of pushing the US out of the region so it can control the gulf, and by doing so, elevate its power status (on a side note, the US sees what Iran is doing, and this could trigger a nuclear holocaust, but that's another story).
3. The war in Iraq has allowed the sectarian violence to move to a new level. The Gulf states fully intend to fight this Islamic civil war in Iraq, and will fund the Sunnis there - to the extent they are not already doing that. The Iranians will fund the Shi'ites, who, because they control the oil export, will also have enough funding to buy weapons. So Iraq is likely to become the main battlefield for this civil war which the Sunnis can not afford to lose.