The Rinnegan (輪廻眼; Literally meaning "Samsara Eye") is the considered the most powerful out of the 3 Doujutsu. The Rinnegan's occurrence is extremely rare, said to only appear when the world is within Desperation it will appear in a young youth's eyes.
The Rinnegan appears as a ripple-pattern around the pupil, with grayish-purple iris and sclera.
The first user of the Rinnegan appeared to be The Sage of the Six Paths, Rikudou Sennin. He was known as the first legendary figure who led the ninja world and created jutsu, also being the first real jinchuriki. The Rinnegan was bestowed to Rikudou by the First Souzousha, Rikudou being the first capable of utilizing the chakra source. The second creature bestowed with chakra was the Juubi, which Rikudou Sennin fought, the demon that terroized the world. In order to defeat the beast, the Sage developed a technique, sealing the beast into himself becoming the first jinchuriki. Unfortunately this had averse affects for him so as he began to die of old age, he used his amazing power to seperate the Juubi into 9 different chakra sources becoming the Bijuu. He then used Chibaku Tensei to seal the body/remains of the Juubi in the sky where no one can reach it, thus creating the moon. He would then leave a tablet behind for his descendants to read the history of the Juubi. Only those who have Rinnegan can fully understand what it says.
Although he wasn't able to reach full peace, the Sage knowing his life was coming to end, gave his strength to his two sons. The older son inherited the eyes of Rikudou, as the younger son inherited the body, willpower and energy of the Sage. On his deathbed, the Sage chose the younger son to be his successor. Overcome by bitterness and envy, the older son rejected this and attacked the younger brother creating a war between them. The generations continued and bloodlines scattered and soon the descendants of the world were scattered around them. One of the descendants showed the fued of the Clan would continue, the Uchiha Clan and Senju Clan.
Centuries later the Rinnegan would appear in a young, rain ninja, Nagato. Using his powers he was able to practically destroy the first Hidden Leaf Village.
Even after that, as the world slowly reached another dangerous time a third user of the Rinnegan appeared. Sin, Kamishito the son of Kusakin, Kamishito taking his mother's surname of Sin.
The Rinnegan has the most basic ability of allowing the user to see chakra, just like the Byakugan and Sharingan. The Rinnegan allows the user to master any jutsu with ease. This very fact is interesting as they are capable of utilizing all 6 Nature Manipulations, literally allowing them to use any jutsu they desire. It also grants the user a list of techniques that allow them to utilize all of the Six Paths techniques. Part of these techniques, the Rinnegan user is said to be able to utilize the Outer Path, which literally allows them to control life and death itself.
When Nagato was the user of Rinnegan he was able to use chakra recievers sent from Gedo Mazo as a way to transfer his eyes and jutsu into a body. With this he was able to have the "Six Paths of Pain" allowing him to control all six bodies. Because the bodies each held Nagato's chakra possessing them, they had the Rinnegan in their eyes. The view of each of the body would all be sent to Nagato, and because of this there was absolutely no blindspot with the Rinnegan since they could see in every direction that their bodies could, another body filling the blindspot of one body.