In this episode Kikyou meets Rasetsu, an old warrior who once traveled with Onigumo (Naraku). Onigumo tricked Rasetsu into attempting to steal the Shikon Jewel by himself. Of course the attempt failed (bcs Kikyou was going out with InuYasha at the time).
Rasetsu returns to camp pissed to find that Onigumo has made off with his troops. Rasetsu finds Onigumo and his troops at an inn down the road celebrating their change in leadership.
Rasetsu blows up the inn, but the charred body of Onigumo somehow manages to survive the blast. Rasetsu throws the barely-living Onigumo off a cliff into the naraku (or abyss). You know the story from there...
BTW- this does not explain the spider scar. Onigumo had the scar before he met Rasetsu.