Ethiopia's Haile Selassie was supported for decades by the United States for geopolitical and Cold War reasons. The Soviet Union had supported Somalia in their claim that parts of Ethiopia and Kenya were part of Somalia.
For the US's unrestricted use of a military base, Selassie was given "aid" (i.e. military aid). This unfortunately was used against Eritrean secessionists and Ethopian guerillas in brutal wars.
30 years of war and conflict continued as Eritrea attempted to gain independence, joined by Ethiopian guerilla forces that were also fighting against the harsh dictatorship. In an April 1993 internationally monitored referendum, where 98.5% of the registered voters voted, and 99.8% of these voted for independence, although the borders were not defined clearly.
Eritrea introduced its own currency. This resulted in war again.
However, the major reason for the recent conflict is the fact that Ethiopia no longer has a border along the Red Sea and therefore relies on going through other countries such as Eritrea in order to ship and trade goods along that line. (Ethiopian propaganda has then meant it says to its people that one of the things it wants to do is ensure a more amenable government is in place -- of course, one that agrees with Ethiopian interests.)