Very little is known about Lao Tze. So little that even his surname is clouded in uncertainties. However, it is generally accepted that his name was Li Er (李耳) or Lao Tan (老聃), and was born in the state of Chu (楚國) during the Zhou dynasty (周朝), but the date of his birth is another mystery. Another accepted fact is that he was a keeper of archive (守藏室之史) in the Zhou court. It was while working in this capacity that Confucius (孔子) came and consulted him on matters of ceremonies and rites. Based upon this encounter it is assumed that he was older than Confucius.
It is unclear when he left this post. Legend has it that after leaving he decided to travel westward riding an oxen. At this time a purple cloud started to hover over him. Thus this journey is generally referred to as the Purple Cloud from the East (紫氣東來). One day he came to China's westmost outpost (函谷關). The guardian of this outpost had heard of Lao Tze, his learning and his westward journey. He specially ordered his underlings to keep their eyes open for Lao Tze and when spotted should reported to him immediately. Upon meeting Lao Tze, he accorded Lao Tze the respects of a student to a teacher and asked Lao Tze to leave some of his wisdom in the form of writing behind. At this point Lao Tze wrote a 5,000 word essay titled Tao Te Ching (道德經). After he finished the essay, Lao Tze continued his westward journey and not to be heard from again.
Here is a brief listing of some of the ideas and concepts in the Tao Te Ching:
Tao (道) is the invisible, intangible, and indescribable force which created the universe.
Ideas and matters exist in pairs and are relative in that the pairs are always opposite yet depending on the other for its own existence. An example is good and evil. We know good when we encounter it only because we have known or encountered evil.
Strength of the weak or soft is greater than the forceful or hard because the hard will break while the soft will bend and rebound.
Advocated a return to the simple life of bygone days when people were self-sufficient and uneducated.
For government he advocated sparsely populated small states where people have very little contact with each other.
Most important of all is the concept which can loosely translated as let it be (無為).
The philosophy as outlined in Tao Te Ching became popular during the early part of the Han Dynasty (漢朝). It is credited with calming the country and settling the population after the turmoil of the Warring States (戰國), the harsh Qin Dynasty (秦朝) and the ensuing civil war (楚漢相爭). From this base Wu Emperor (漢武帝) was able to launch his successful campaigns of driving the Northern nomads, Xiongnus (匈奴), far into the desert.
Hundreds of years later, the Taoists (道教) while battling Buddhism (佛教) for followers adapted Tao Te Ching as their religion's dogma. In turn they honoured Lao Tze as the founder of their religion. However, honours didn't really started to pour in until the Tang Dynasty (唐朝).
Keep in mind that since the latter part of the Han Dynasty, bloodline and ranked clans (門第望族) were of utmost important. At one point clan membership was the only requirement for high ranking positions in government (上品無寒門，下品無望族). Capability and learning played no part whatsoever. Yes, this is a caste system. Its meridian was during the North-south period (南北朝). The two most powerful clans were Wang (王) and Xie (謝). Stories had it that during the early Tang dynasty the emperor had trouble finding a spouse for one his daughters as the royal family was ranked six on list of desired matches. <> Then it is understandable for the royal family of the Tang Dynasty who was very conscientious of its somewhat mixed bloodline to seek direct linkage to a historical Han figure. That figure happened to be Lao Tze. Taoism in turn became the national religion during the Tang Dynasty.
It all started in May 620AD (武德三年) when Ji Shan (吉善) of Jinzhou (晉州) walking along Sheep Horn Mountain (羊角山) met a very dignify-looking old gentleman on a white horse with red mane.
The elderly man said, "Go and inform the Tang Emperor that I am his ancestor. At the end of the year there will be peace and his descendants will be on the throne for a thousand years."
Lee Yun was amazed by this and decided to build a temple where the alleged meeting took place. This was the first step in solidifying the link between the Tang Emperor and Lao Tze. Later a royal edict officially ranked Taoism ahead of all religions.