A running debate amongst kung fu stylists is what exactly constitutes “internal” kung fu from “external.” Many different explanations are heard: some say that internal styles use more yielding, or that they use chi (whatever that means), or that external styles are called external because they have their roots in the martial arts of bodhidharma (an indian, from outside china) rather than from inside china.
I think that the debate over the difference between internal and external has gotten too esoteric and complicated. Here’s what I consider to be the difference between the two:
Imagine that you are a chinese martial artist, circa a hell of a long time ago. To help you get into character, it will help to forget everything you may have picked up from modern science about physiology, body mechanics, and so on.
You have two fighters in front of you - just for fun, we’ll call them Nei and Wei. They have the same height, the same build, are the same age, and weigh the same amount. However, when Nei delivers a certain type of blow, it hits very hard. When Wei delivers the same blow, it doesn’t hit as hard.
The two punches appear identical when watched. They’re thrown from the same angle, both of them appear to use the entire body to deliver force, and they both are thrown at the same speed. Why, then, does one hit so much harder than the other?
Since the external (obvious, visual) qualities of the two punches are the same, the explanation for the difference in power delivered must lie on the inside - and so, the ancient chinese developed the concept of “internal skill.” Nei has more internal skill than Wei, so his punches hit harder.
Felix Trinidad is a skinny guy with skinny arms. He doesn’t look like a knockout puncher. There are probably a hundred puerto ricans whose build, body type and musculature are next to identical to his. But if you ask one of them to throw a left hook that on the outside looks almost identical to Trinidad’s, theirs won’t hit half as hard. Why? If you the ask the chinese guys in the above example, they’ll say that it’s because Trinidad has more internal skill than the other puerto rican guy they pulled off the street.
Internal and external represent two different levels of accomplishment. A student will start training the external qualities of a movement first - that is, what part of the body goes where and when. Once the students knows that part, he or she learns the internal qualities - how to deliver that blow with power. Nearly any martial art becomes internal once the practicioner has reached a high level.
As for how some styles came to be known as “external” and some as “internal,” I don’t know. Maybe someone here knows and will post the reason. Nowadays when we say “internal style,” we’re usually talking about tai chi, bagua, or hsing-i (or liu he ba fa, for those that have heard of it). However, no style or group of styles have a monopoly on internal skill.