King James I (previously he was James the VI of Scotland BTW) ordered a new translation of the Bible in 1604. The most popular versions at that time were the Geneva and the Bishops Bibles. It took the group of scholars until 1611 to finish their work. They had 15 'rules' or instructions to follow:
1. The ordinary Bible read in the Church, commonly called the Bishops' Bible, to be followed, and as little altered as the original will permit.
2. The names of the prophets and the holy writers, with the other names in the text, to be retained, as near as may be, accordingly as they are vulgarly used.
3. The old ecclesiastical words to be kept, as the word church, not to be translated congregation.
4. When any word hath divers significations, that to be kept which hath been most commonly used by the most eminent fathers, being agreeable to the propriety of the place and the analogies of faith.
5. The division of chapters to be altered either not at all, or as little as may be, if necessity so require.
6. No marginal notes at all to be affixed, but only for the explanation of the Hebrew or Greek words, which cannot, without some circumlocution, so briefly and fitly be expressed, in the text.
7. Such quotations of places to be marginally set down as shall serve for the fit reference of one Scripture to another.
8. Every particular man of each company to take the same chapter or chapters; and, having translated or amended them severally by himself where he thinks good, all to meet together to confirm what they have done, and agree for their part what shall stand.
9. As any one company hath dispatched any one book in this manner, they shall send it to the rest, to be considered of seriously and judiciously; for his Majesty is very careful on this point.
10. If any company, upon the review of the book so sent, shall doubt or differ upon any places, to send them word thereof, to note the places, and therewithal to send their reasons; to which if they consent not, the difference to be compounded at the general meeting, which is to be of the chief persons of each company, at the end of the work.
11. When any place of special obscurity is doubted of, letters to be directed by authority to send to any learned man in the land for his judgment of such a place.
12. Letters to be sent from every bishop to the rest of his clergy, admonishing them of this translation in hand, and to move and charge as many as, being skillful in the tongues, have taken pains in that kind, to send their particular observations to the company, either at Westminster, Cambridge, or Oxford, according as it was directed before in the king's letter to the archbishop.
13. The directors in each company to be the Deans of Westminster and Chester, for Westminster, and the king's professors in Hebrew and Greek in the two universities.
14. These translations to be used, when they agree better with the text than the Bishops' Bible: Tyndale's, Coverdale's, Matthew's [Rogers'], Whitchurch's [Cranmer's], Geneva."
15. By a later rule, "three or four of the most ancient and grave divines, in either of the universities, not employed in translating, to be assigned to be overseers of the translation, for the better observation of the fourth rule."
One interesting observation is that this group of scholars translated the original Hebrew (Old Testement) and Greek (New Testement). Which brings up...
HERE is a great chart that shows all the major versions/translations of the Bible. As you can see, some are formal translations, some are attempts by (mostly) modern men to paraphrase another version into more modern language. The problem there of course is that it man's trying to say what the Bible really means (at least to them). The most famous of these types is The Living Bible which is paraphrased based on the American Standard Version
As several sites will point out, the problem with any translation is that its that particular translators attempt at taking the original language and translating it to the language in use/vogue at the time. This leads to issues as you can well imagine...
I started looking for the comparative chart above and got side tracked. This history of the KJV was interesting and got me into a lot of reading I didnt plan on doing at lunch.