It was because Ueshiba had internal power skills that he could espouse a philosophy of peace (as Rob pointed out). When he realized what it made the body capable of doing without having to resort to "waza," he could just stand there and let his attackers harmlessly bounce off him, or he could choose to do something else with it, expressing it outwardly through whatever techniques he chose to "make happen" -- which were invariably more powerful than technique effected without an internal "force" behind them. The thing is, the internal skills gave him a choice.
Strictly speaking, this isn't true. Plenty of people have made the commitment to a "philosophy of peace" with no martial capability whatever. Their "internal power" was just plain guts.
Gandhi had that kind of power, so did the first monk to burn himself alive at the beginning of the Viet Nam War. The civil rights workers who sat down at the integrated lunch counter, knowing that they'd be beaten, even killed, they had the power...
If you look at the folks who have attained the kind of "internal power" used in martial arts, it is very rare that you find this kind of non-violence. That's why O-Sensei was so radical. Power can be a trap. If you look at the folks who have it, most are "fighters". Why do people do martial arts in the first place? I think it is clear that most folks get into the arts because of fear. Many of the legendary figures one reads about were sickly as kids, or had some traumatic incident which made them feel powerless as children.
People who are obsessed with the power side of these arts, whose primary concern is being able to beat any opponent are often simply trying to paper over these fears with a facade of power.
The martial arts are full of these folks, as Rob mentioned. Folks who attained tremendous power to destroy but who were still so fear based in their fundamental thinking that they could barely interact with their fellows. I look around and I see folks I've known for 30 plus years who wouldn't hesitate an instant to go up against three attackers with sticks but who can't simply have a conversation with their peers for fear of being judged.
O-Sensei was a radical in his martial arts world in that he saw a way to take the training that he had done and create something that went beyond fighting. It was radical enough that many of his own students couldn't go there with him. If you look at a guy like Shioda Sensei, he wanted no part of the spiritual trappings which the Founder put onto the art as it developed. For him it was about the power.
I am not trying to say, in any way, that the "internal power" issue isn't important. If you want to attain the top level of skill in our art, that is an important component. I outweigh Saotome Sensei by 200 lbs and he can pulse me straight back onto my butt when I grab him. If you want to be able to relax like Yamaguchi Sensei or Endo Sensei, you can't do it without a strong structure, period. If you don't have the internal development, then the only other way to put structure into your form is through muscle tension. And if you are using muscle tension, you aren't doing aiki.
But I am saying that you can be highly skilled in "internal power" development and not be doing Aikido. It's not Aikido just because it has "aiki". Daito Ryu is not Aikido. Yanagi Ryu is not Aikido. Aikido is a creation of Morihei Ueshiba. He created our training out of what had gone before. It isn't about fighting, it's about not fighting. Period.
But folks use that fact as an excuse for having poor technique. Many of the folks one encounters who are most concerned with the peace and harmony side of the art have weak and deficient technique. They have almost no understanding of what "aiki" means as it relates to physical technique. Consequently, they really have no ability to actually connect their philosophical / spiritual ideas with their technique.
On the other hand, one sees Aikido people for whom "application" is everything. These folks have always been there, right from the beginning... How did the Founder "market" the art? With displays of technical skill and power. I think that most of the folks who started Aikido after seeing him did so because they wanted to be able to do what he could do. That was "the hook". Some, as they trained with the Founder, were able to go far beyond that simple desire and see the larger picture which O-Sensei was outlining. Others never did. They just wanted the power. I think that the majority of the deshi fell somewhere in between, finding O-Sensei's deep spirituality compelling but obscure and they still wanted the "power" m,ore than anything else.
There is a lot of discussion about what O-Sensei meant when he said that "no one was doing his Aikido". There have been attempts to maintain that this was due to the fact that no one was training the way he and and martial skills were falling short. I see absolutely no evidence that this was the case. What I see as O-Sensei's great concern was that no one understood the spiritual foundation upon which he based his art. Everybody just wanted the power...
These streams have to be brought together if Aikido, as O-Sensei envisioned it, is to be preserved. Sure, go take what you can from Dan H, Akuzawa, and Mike S or anyone else who has the goods in the "internal power" area. Train with folks who understand "aiki" like Kuroda, Angier, Threadgill, Okamoto, Popkin, or any other Sensei who can show you something. Every one of these people is better at what they do than 99% of the Aikido folks you will run into.
But then I say, bring it home. Take what you have learned and bring it back into Aikido. Don't devolve Aikido into something it was not intended to be in an attempt to rediscover its fighting roots. If that's what you want, go do Daito Ryu, it's a better version of that than Aikido is.
At the same time do not content yourself with technical mush overlaid with platitudes. Holding hands and singing Kumbaya is not Aikido. Being nice to people is not Aikido. Finding a way to get along is not "aiki". The kind of understanding of how peace and love relate to Budo comes with hard training. If you want to understand O-Sensei's Aikido, you better start doing technique with "aiki" . O-Sensei's Aikido was about an understanding of the fundamental energetics that govern the universe. If the energetics of your practice are fundamentally false from the start, you have no hope of discovering what the Founder's message really was.
O-Sensei was unique in that he took a background in fighting arts and discovered for himself the truth of not fighting. The reason that no one is doing "his Aikido" is that people either fall into one of two camps.
The fighters are simply worried about how they can use Aikido to defeat some ill defined set of threats that exist in their world; imminent and threatening enough that they will spend their adult lives preparing for these encounters. Most will never actually have the encounter, but they will be ready when they do...
The idealists do Aikido as some sort of dance of Peace. They have little or no interest in how Aikido technique is applied. Most have no background in other martial arts, in fact if they weren't doing Aikido, they wouldn't be doing martial arts at all. They do strikes but can't actually strike, they do throws but can't actually throw. Anyone who shows them this fact is labeled as "unharmonious" and is pressured out of the community so that the collective illusion that something is actually going on can be maintained.
None of this was O-Sensei's Aikido. O-Sensei trained with the attitude of shin ken shobu, the live blade encounter. For O-Sensei understanding of the spiritual could be made manifest in the physical through his waza. It was through an understanding of what kind of "connection" was required to defeat an opponent with "aiki" that he discovered for himself the underlying connectedness of all things. If you don't understand that through your technique you don't understand it the way O-Sensei understood it.
Aikido is in danger of losing any connection with what the Founder taught and did himself. Fighting isn't it. But training properly will simultaneously increase your ability to do so and reduce your need or desire to. Training should increase your sense of connection to other human beings, if it doesn't it's not Aikido. Training should make you less fearful. if it doesn't it's not Aikido. Training should develop a sense of how to meet conflict expansively rather than by contracting. If it doesn't, it's not Aikido. You should be able to demonstrate every aspect of your understanding of spiritual principles on the mat via physical technique. If you can't, you are not doing Aikido.
These discussions of internal power are about an aspect of Aikido technique that is lacking. They are not about Aikido as a whole. Attaining these skills does not mean you can do or even understand Aikido. That is a far larger issue and can't be done without actually practicing... Aikido.