Gundams are huge robots that guys pilot to fight other, less awesome, giant robots.
The first gundam was built in Space, on orders from Squadala Man, in order to gain an advantage over the (Semi) powerful Ducky Empire. However, some guys who were working for Ducky heard that the first gundam was being built and they tried to steal it. They failed. Horribly. Afterwards, the Gundam went to UnWorld and kicked ass left, right and centre until it was destroyed by Char Aznable.
Purpose of the Gundams
To quote Squadala Man, he wanted the Gundams to be able to: "Kick that motherf*&^#@g Handpuppet's forces right up the-"...well you get the idea. Eventually, after Squadala Man started the construction of more Gundams to replace the first, Ducky ordered some of his troops to steal one. They succeeded this time and converted one of the captured Gundam's weapons to fire Snowtomic Bombs.
The Idea catches on
After a while, Ducky FINALLY decided to build his OWN Gundams instead of stealing Squadala Man's Gundams and built three Gundam MKII's...which had the same armour as current mass-production Giant Robots. Then Ducky built ANOTHER Gundam which was pilotted by Char Aznable. Then Japan built yet another Gundam, only this one could transform into a plane.
While the flare of Gundams has died down somewhat, Ducky and Squadala Man continue to compete against each other to see who can build a better Gundam. All the while they still crank out other Giant Robots just to show how badass Gundam's are.