I don't own Mako, Iroh, Bolin, or anybody else in The Legend of Korra nor do I own The Legend of Korra
The "Fight of the Century," as the media had taken to calling it, came about because of two idiots. The first idiot seemed to think that General Iroh II was far enough up the royal food chain that killing him would have an effect on something or other (the would- be assassin wasn't very clear on what he wanted). Idiot number two was named Bolin and he thought that General Iroh II was worth dying for. The specifics of how the match came to be are thus: when Iroh showed up at the memorial for Bolin, Mako flew into a rage. Iroh said nothing during all of this—he just glared and growled and some smoke may or may not have come out of his nose during some of Mako's less savory comments. The scene ended with Mako challenging Iroh II to an Agni Kai to be fought in one week's time—a challenge which Iroh accepted.
The bets people were making on the outcome of the fight were almost a bigger story than the fight itself. People, it seemed, had placed bets on every possible outcome. People were even betting on when the fight would end in tears and hugging, although, most people were betting on who would win and whether it would be based on a technicality or not.
The day of the match they didn't say anything to anybody, although trying to talk to either one of them stopped being a good idea almost as soon as Mako had challenged Iroh to an Agni Kai. The rules had to be modified so that the media and other spectators wouldn't get hurt and healers and police officers were standing by, just in case. When they were signaled to start, Iroh didn't do much of anything; he just stood there while Mako tossed fireballs at him. Occasionally he would dodge or diffuse a fireball, but it was obvious that his heart wasn't in it.
Eventually, though, just throwing fireballs wasn't enough. Bending lightning was against the rules but insulting your opponent wasn't. Whoever bet that Mako would insult Iroh's manhood, sexual orientation, and accuse Iroh of using Bolin for his own sick needs (in that order) was sure to win a lot of money. Still, Iroh said and did nothing. Finally he just kneeled.
"WHY AREN'T YOU FIGHTING?!" Mako shouted.
"Because," Iroh started, "I promised my grandfather that I would never fight in an Agni Kai. And I promised your brother that I wouldn't fight you. I guess I'm not very good at keeping my promises, am I?" At that Iroh let out a hollow laugh.
"Why did you agree to an Agni Kai if you weren't going to fight?"
"Because I wanted to lose," Iroh breathed out, taking Mako's hands in his own and placing them on his own neck. "Before my grandfather won his last Agni Kai there was only one way for someone to lose."
However bet that "The Fight of the Century" would end with both opponents hugging and sobbing after 27 minutes won a lot of money that day.