The Bloons were first created by a malfunctioning machine. A carnival worker named George, frustrated with having to inflate hundreds of tiny balloons for the dart-throwing game every single day, decided to build a machine that would create and inflate large amounts of balloons on its own. By 2004, it had become widely used at fairs and carnivals all around the state.
In May 2004, George was attempting to take the machine to a party, where hundreds of balloons were due to be dropped from the ceiling by a net. On the way to the party, George was in a car accident which sent his car over the edge of a small cliff and into a nearby lake. He drowned inside the car; however, the machine was kept safe inside a large, watertight trailer attached to the back of the vehicle.
Six months later, the Environmental Protection Agency removed hundreds of discarded barrels of nuclear waste from the lake, accidentally taking the trailer with them. The trailer was taken to a proper nuclear waste dump and abandoned there for two years. It was not until March 5th, 2007 that the mutated, irradiated balloons, nowadays called Bloons, began to terrorize the civilians and endanger hundreds of lives. They had to be destroyed from a distance using darts and other weapons to keep them from popping themselves on monkeys and injuring them.
The location of the original Bloon Machine is unknown and unreachable to the Monkey Military, as nobody has been able to get anywhere near it since it started creating Bloons. The Legion has upgraded the original machine many times over the years, and additional machines have also been built, at the Bloons' command.
Many normal Bloons are not intelligent or sapient. The first Bloons were like ants, following each other mindlessly, knowing only violence. However, over the years, consistent radiation plus help from the Legion has resulted in a large majority of Bloons being sentient in one way or another. Long ago, they attacked without reason or knowledge, but nowaways, they are simply stuck in their roles, unable to imagine a world where they don't have to fight the monkeys, where being popped too soon isn't a fact of life.
A default MOAB is more intelligent than most regular Bloons, the vast majority being comparable to a 10-year-old child in terms of intelligence and reasoning skills. Before other Bloons were created, MOABs were the leaders of the Bloons. A BFB is slightly more intelligent than a MOAB, a ZOMG has the intelligence and reasoning of a 10-year-old, and a DDT or BAD has the intelligence of a 15-year-old. A DDT is a highly intelligent targeted attacker, not too unlike a sniper. The sentient ones among the Bloons are simply too angry at what happened to their predecessors, to ever forgive the monkeys; and those who can forgive them, are sent out to fight anyways.
The extreme levels of radiation have caused there to be many variations in how Bloons are created. For example, you might see a Purple Bloon with a Lead shell around its middle, or a Pink Bloon with random black stripes, or a ZOMG with only one propeller, or a very tiny MOAB that had to be sewn back together by Legion monkeys because her own ceramics broke her apart. But these Bloons are sent off to do other jobs, never being allowed to fight for fear of making the Bloons seem weak or imperfect. However, one might say that this enforced perfectness is exactly what has allowed the monkeys to see the Bloons as a faceless enemy rather than their own species...
The Boss Bloons are comparable in intelligence to an above-average adult monkey. They can outsmart many of the heroes, and are fully sentient and sapient. They would definitely be able to comprehend and uphold a truce if one was offered and they wanted it. But the Boss Bloons have no interest in stopping their attack, and are angry at the monkeys for ever attacking any Bloons, even if the Bloons were mindless objects of destruction when the war started.
(However, they fail to acknowledge that the Bloons, though underdeveloped and non-sentient when the war started, attacked first, and that the monkeys were always just defending themselves. What were we supposed to do? Come on, Bloonarius, be reasonable here...)
Bloons who are not able to fight, or were forbidden because of their mutations, shelter in Legion bases, performing other tasks for the Legion or simply hiding away from non-Legion monkeys, who will pop them on sight or run away and call for help. Some hide underground instead. If the war were ever to end, the Bloons would live in tall, old-growth redwood forests, building civilizations in the treetops. They would also live in floating cities among the clouds, or in the mountains.