The unification of Germany in 1870 and its stunning victory in the Franco-Prussian war destabilized the balance of power in Europe. As the other answer indicated, Germany wanted to become a colonial power, feeling it had "missed out" because it became a nation-state so late in the game. One way to do this was to challenge Great Britain's undisputed rule of the seas. Since the end of the Napoleonic Wars, Britain had been the world's superpower, and much of this was based on its strong, superior, unrivaled navy.
The Germans began a naval buildup in the 1890s. This naturally made Great Britain nervous. Germany was vying to become a world power, if not the world power, and Britain had no intention of being knocked off its pedestal. Therefore, to secure their naval advantage, the British developed a steam-powered warship called the dreadnought that was equipped with bigger cannons and greater firepower than any other warships existing at the time. Germany and the other powerful nations soon followed suit.
England rightly guessed that Germany was building up its army and navy because it wanted to start a war. England therefore built up its arms to be ready to smash any attempt the Germans might make to seize power. It is just one step from having a huge military buildup to using it.
By 1914, tensions had risen to a high point, and nations were lined up in such a tangled complex of treaties and alliances that any match thrown on the fire could start a conflagration. When the Archduke Ferdinand was assassinated, that was the match; both the Germans and the British already had big arsenals due to the arms race they had been engaged in, and both were ready to test them.