Originally when the Martial Arts was taught there were only three belt levels; White, Brown and Black.  Once one achieved their Black Belt they were then a Shodan.  Once you were a Shodan you were one of three levels: Instructor, Head Instructor, Master Instructor.  One would stay with their Master Instructor, until the Master Instructor felt  they could not teach their head instructor anything else.  The Master Instructor would then  grant permission to his Head Instructor to open their own dojo (school) and then they would become a Master Instructor.  

This ideology did not last long here in the United States as us Americans wanted something to show for our achievements.  Some people believed that as one trained and sweat was put into the belt it would gradually change colors giving us the belt color system; yellow, orange, purple, green, blue, brown and black.

Once the color belt system was developed the American Black Belt wanted to be acknowledged as well, changing Shodan-Instructor to 1st degree Black Belt, Head Instructor to 2nd degree Black Belt and Master Instructor to 3rd degree Black Belt.  After awhile the American Black Belts wanted more ranking and formed associations and created the 5th degree Black Belt (that's right they skipped 4th degree) and called this the Master rank.  Once this glamour wore off the associations then created the 7th degree ranking (skipping the 6th degree) and called this rank a Senior Master.  After more time passed us American Black Belts wanted more ranking and created for most systems the Highest rank of 10th degree Black Belt (skipping 8th and 9th degree) and called this rank Grand Master.

This has been adopted and accepted all around the world.

The Kenpo Systems uses the term "Dan" after the numerical level. (i.e. Shodan- 1st Dan, Nidan- 2nd Dan, Sandan- 3rd Dan, Yodan- 4th Dan, Godan- 5th Dan, Rykudan- 6th Dan, Shichidan- 7th Dan, Hachidan- 8th Dan, Kudan-9th Dan, Judan- 10th Dan) The American ranking systems use the term "Degree".

The 4th, 6th, 8th & 9th degrees were added later to slow the progression to the 10th degree.