It depends on what time period we are talking about. During most of dynastic China (11th c. BCE - 20th c. CE), the martial arts, in this case skill with military weapons like spears, bows, and swords, were used with the expressed purpose of killing soldiers on the battlefield. Boxing and wrestling had no practical use in warfare for two reasons: 1) soldiers fought in tight formations with weapons; and 2) punching and kicking would have no effect on men wearing armor. Unarmed fighting was primarily used to help prepare soldiers for weapons training and to keep their bodies fit between battles. Men who had been conscripted later returned to their lives and used the skills that they had learned to defend themselves and their families. The number of people living in the civilian population who knew martial arts fluctuated over the centuries. This number was usually at its highest during times of war and lowest during times of peace. It was during the Song Dynasty (10th - 13th c. CE) when circus-like displays of martial skill-e.g., wrestling and mock sword duels-became a popular form of spectator entertainment. This influenced depictions of martial arts in stage plays in later dynasties. Barring Confucian archery, the martial arts were not looked upon as a type of self-cultivation until the 19th century. China had used guns in warfare from at least the 13th century; however, the advanced firepower that European forces introduced in the 19th century made boxing and traditional military weapons obsolete. Just like scholars who could not gain government positions came to look upon their studies as a form of self-cultivation, so too did the practitioners of Chinese martial arts who could no longer use it on the battlefield. During the mid-20th century, martial arts entered the realm of sports with the inception of competitive forms competitions. The Communists encouraged these sporting events because they satiated the people's need for martial expression, while also redirecting any restlessness that might pose a threat to the government towards physical training. In conclusion, martial arts were used for killing, self-dense, entertainment, self-cultivation, and sport over the centuries.

For a more detailed explanation, see the book Chinese Martial Arts: From Antiquity to the Twenty-First Century (2012) by Prof. Peter Lorge.

Tradition is that kung fu was developed in China in the temples. The Bodhidharma created it to teach the Shoalin Monks. Since he was from India, it is believed he combined the arts he learned there with new insights.

Second Answer:

No, Shaolin monks did not create martial arts. In fact, martial arts predate Buddhism (and even religious Daoism) in China by many centuries. The martial arts arose from battles between early people who transformed hunting tools like spears and bows into weapons of war. For most of dynastic China (11th c. BCE - 20th c. CE), military weapons like spears, bows, and swords were used with the expressed purpose of killing soldiers in battle. This emphasis on killing violates the Buddhist precepts against taking life. Most importantly, it is questionable whether the religiously devout monks of Shaolin, which is traditionally associated with the Chan School of Buddhism, ever practiced martial arts at all. Prof. Meir Shahar notes that Shaolin originally took up military weapons in an effort to protect their rich monastery against mountain bandits. They even gained a certain amount of notoriety during the 7th century when they helped future Tang Emperor Taizong (Li Shimin) defeat his enemies, thus allowing his family to found the Tang Dynasty. However, Prof. Peter Lorge suggests that the "monks" who took part in these and later battles during the Ming Dynasty were actually violent men skilled in martial arts who actually dressed as monks to avoid the law or military conscription. It is known that various dynasties had problems with people pretending to be monks. This eventually led to them issuing "ordination certificates" to authenticate a person's monkhood. It is also known that the monks who took part in Ming dynasty battles with Japanese pirates did some very questionable things, like killing an unarmed woman with an iron staff. That doesn't sound like something that a religiously devout Buddhist monk would ever do. These imposter monks were therefore most likely some type of security force hired by the more devote community to protect its interest and to help the dynasty whenever necessary.

For a broad overview of Shaolin martial history see The Shaolin Monastery (2008) by Prof. Meir Shahar. For a concise overview of Chinese martial arts history and a rebuttal to Shahar's claims, see Chinese Martial Arts: From Antiquity to the Twenty-First Century (2012) by Prof. Peter Lorge.

Read more: Did_the_shaolin_monks_create_all_kung_fu

No, Shaolin monks did not create martial arts. In fact, martial arts predate Buddhism (and even religious Daoism) in China by many centuries. The martial arts arose from battles between early people who transformed hunting tools like spears and bows into weapons of war. For most of dynastic China (11th c. BCE - 20th c. CE), military weapons like spears, bows, and swords were used with the expressed purpose of killing soldiers in battle. This emphasis on killing violates the Buddhist precepts against taking life. Most importantly, it is questionable whether the religiously devout monks of Shaolin, which is traditionally associated with the Chan School of Buddhism, ever practiced martial arts at all. Prof. Meir Shahar notes that Shaolin originally took up military weapons in an effort to protect their rich monastery against mountain bandits. They even gained a certain amount of notoriety during the 7th century when they helped future Tang Emperor Taizong (Li Shimin) defeat his enemies, thus allowing his family to found the Tang Dynasty. However, Prof. Peter Lorge suggests that the "monks" who took part in these and later battles during the Ming Dynasty were actually violent men skilled in martial arts who actually dressed as monks to avoid the law or military conscription. It is known that various dynasties had problems with people pretending to be monks. This eventually led to them issuing "ordination certificates" to authenticate a person's monkhood. It is also known that the monks who took part in Ming dynasty battles with Japanese pirates did some very questionable things, like killing an unarmed woman with an iron staff. That doesn't sound like something that a religiously devout Buddhist monk would ever do. These imposter monks were therefore most likely some type of security force hired by the more devote community to protect its interest and to help the dynasty whenever necessary.

The legend of Bodhidharma teaching medicinal breathing and stretching exercises to the monks comes from the 17th-century. Stan Henning has shown in his paper "Ignorance, Legend and Taijiquan" that the idea of the Zen patriarch teaching the monks boxing didn't come about until the 20th-century.

For a broad overview of Shaolin martial history see The Shaolin Monastery (2008) by Prof. Meir Shahar. For a concise overview of Chinese martial arts history and a rebuttal to Shahar's claims, see Chinese Martial Arts: From Antiquity to the Twenty-First Century (2012) by Prof. Peter Lorge. See also my paper "A Venerated Forgery: The Daoist Origins of Shaolin's Famous Yijin Jing Manual."