It's pretty simple to google/wikipedia what you're asking here:
http://en.wikipedia.org/wiki/School_bullying
This is what i found after a quick skim:
"Bullying is usually associated with an imbalance of power. A bully has a perceived authority over another due to factors such as size, gender, or age. Bullies are not identifiable by their appearance or group identification; rather we need to focus on how they act. The definition of bullying briefly describes actions that are exhibited by an individual that is playing the role of a bully. Boys find motivation for bully from factors such as not fitting in, physically weak, short-tempered, who their friends were, and the clothes they wore. Girls on the other hand, result from factors like not fitting in, facial appearance, emotional, overweight, and academic status. In both sexes, a speech impediment of some sort (such as stutter) can also become the target of a bully.
Individuals that choose to be a bully are not typically born with the characteristic. It is a result from the treatment they receive from authority figures, including parents. Bullies often come from families that use physical forms of discipline. This somewhat turns the tables on the bully, making them the victim. Unfortunately, this leads to a strategy of bully or be bullied."
TL;DR a feeling of inadequancy and repressed negative emotions imposed by authority figures are the two driving factors for bullies.