The blood-smeared image of Kali is after she killed the demon Raktavera. According to Hindu Mythology, Lord Brahma granted the boon to Raktavera that for every drop of his blood that fell on ground hundreds of demons like him would be produced. Thus the only way of slaying Raktavera was by not allowing even a drop of his blood to fall on the ground.
Thereby Kali pierced him with a spear and drank all his blood as it gushed out. Kali once gave free rein to her blind lust for destruction. To stop the world from being destroyed Lord Shiva brought himself to the feet of Kali. On sensing her husband beneath her feet she stopped and thus the world was saved. She acquired her name Kali meaning 'conqueror of time' as she subdued her husband Lord Shiva by trampling over him. This way Devi the symbol of fertility conquered Shiva, the inexorable destroyer, who was equated with time.
Origin of Kali is found in "Chandi" section of Makrenda Purana. She evolves from Devi Durga herself in the midst of battlefield. According to Markenda Purana Devi appears mainly in three forms. She appeared whenever the Gods are struck in any crisis and prayed for her help. On first occasion she appeared when Brahma pleaded her for killing Madhu and Kaitava. On second occasion she appeared as Mahishasurmardini. On the third occasion she was called through prayers for killing Sumbha and Nishumbha, the two demon brothers.
All the other Goddess are mere her different forms, Durga, Katyani, Shivaduti, Sakambhari, Bhima or Bhramri. Description of this Bhramari (look of a wasp) is found in Kalika Purana. Here Devi drinks nectar like a black wasp.
According to Chandi Purana all Gods including Indra prayed to Devi to rescue them from Sumbha and Nishumbha. Devi creates another Goddess from her body called Devi Koushiki, as she is born out of the cell (kosh) of Devi. As Devi Koushiki was wandering at Himalayas Chanda and Munda, two followers of Sumbha and Nishumbha, found her. She felt disturbed by their presence and she became irritated. Her anger was so fierce that her body turned dark. From her frowning took birth the slayer Kalika. She looked fierce and ugly. She is a thin lady, wearing tiger skin, and adorned with garlands of human heads, and bearing human skulls.
Her rudeness and her streatched mouth with dangling tongue add to her furious look. Her horse voice surrounds the horizon. Just after her appearance she started to eat the whole of the battle force of the demons along with the horses and elephants. Finally with a furious sound she killed Chanda and Munda. With an inhuman laugh she presented Devi Koushiki their torn heads. On return Devi Koushiki entitled her as Chamundi, slayer of Chanda and Munda.
In every forms of Devi, be it Durga, Kalika or Chandi, one purpose becomes clear. She is not always the destroyer of demons or Ashuras. She is not only the defender of the Gods; she destroys the evil within man thus enhancing the goodness within leading to preservation of world peace.
According to legends once the demons named Sumbha and Nishumbha grew in force and pose a challenge to Indra, King of Gods, and his Kingdom of Heaven. Gods sought protection from Mahamaya Durga, the Goddess of Shakti or Power. At this stage Goddess Kali was born from Durga's forehead as Kal Bhoi Nashini to save heaven and earth from the growing cruelty of the demons.
After slaughtering the demons, Kali made a garland of their heads and wore it around her neck. In the bloodbath, she lost control and started killing anyone who came her way. There was chaos all around. To stop her, Lord Shiva threw himself under her feet. Shocked at this sight, Kali stuck out her tongue in astonishment, and put an end to her killing spree. The well-known picture of Kali Ma shown with her tongue hanging out, actually depicts the moment when she steps on Lord Shiva and repents.
That momentous day is celebrated ever since as Kali Pooja. Performing the Puja with faith devotees seek protection against drought and war and blessings of general happiness, health and prosperity. Kali Poojan is a tantrik puja performed only at midnight on Amavasya.