Every city has its story, and Krakow's commences in the 7th century with a hero and a dragon: when Krak (the hero) poisoned the dragon (which was terrorizing the people), the happily liberated town took his name. That story -- immortalized by the fire-belching look-alike which stands to one side of Wawel Castle -- imaginatively stretches the truth. In reality, this area has been settled since the Stone Ages, long before Krak showed up. Regardless, imagination continued to play a role in Krakow, which grew from a crossroads trading town into the intellectual and cultural center of Poland.
Krakow's first big break came when the first Polish dynasty relocated here. Somewhere around the 1030's, the Piast king moved the capital to Krakow, and from then until the late 1500's, Krakow flourished. Initially a typical fortified town with castle included, Krakow built and built again until it could lay claim in the 1300's as one of the most beautiful and cosmopolitan of European cities. One Polish king in particular pushed Krakow beyond the progressive pale: Kazimierz established Poland's first university here in 1364, he created a eponymously-named second town where the newly-welcomed Jews settled, he straightened out the legal system, and in his spare time built a few more architectural gems.
But alas, Krakow suffered a fate similar to Poland itself. Its decline began when Poland formally teamed up with Lithuania in 1569. The Lithuanian capital, Vilnius, was a bit too far from Krakow, and the capital again relocated to the more conveniently placed Warsaw. This blow was deepened by the Black Plague and the Swedish invasions in the 17th century; both wiped out a fair portion of the population and the city itself.
Down, but not out, Krakow revived in the 19th century. Unlike the rest of partitioned-Poland, Krakow initially retained pseudo-independence as a 'free city' (from 1815-46), and even when it lost that, its Austrian masters proved rather lenient. Said leniency provided fertile ground for counter movements: Krakow nurtured the Polish culture and its rebellious adherents until Poland regained independence in 1918.
That short-lived independence ended in 1939, and Krakow once more became the capital of (pseudo) Poland under the guidance of Hans Frank. The oft-told events which followed (which are respectfully acknowledged, but not included here) stripped the city of its cultural and intellectual elite, leaving it fair game for the communism which followed. After the war, the communists attempted to finish what the Nazis began by industrializing the region. The smoke-belching, acid-rain producing Nowa Huta steelworks proved a failure in this regard, but unfortunately left their polluting taint across Krakow. But, that time passed, and Krakow has again emerged to become a center of artistic, cultural, and intellectual life in Europe.