When Haruka suddenly appears before Kiryuu and asks him to kill Miyamoto Musashi, Itou helps his friend by introducing him to an informant, Hon'ami Kouetsu 本阿弥光悦 (who just also happens to be a famous artist). It seems that Itou has been using Kouetsu's network of informants for his own purposes, unbeknownst to Kiryuu.
One day, Itou calls Kiryuu to the beach and attacks him. When Kiryuu defends with Musashi's signature two-swords style, Itou recognises him immediately. Eventually, he relents, and explains his backstory to Kiryuu.
It seems that one of the men responsible for smearing Kiryuu's name, Sasaki Kojirou 佐々木小次郎, is Itou's nemesis. He has been hunting this man for a long time. Itou was famous during the Sengoku era as a skilled swordsman, but, his family and students were all killed at Kojirou's hands. Learning through Kouetsu that Musashi also bears a grudge against Kojirou, he figured that the two of them should duel to see who had the right to take Kojirou's head.
Itou Ittousai was another real person. He was born around 1550, but his death is unknown. Some accounts have him dying in his 70s, but others in his 90s. He established the "Swingle-Sword Style" ("Ittou-ryuu"), or "Unrivalled Sword Style" and took that as his name. He may have done so before the Edo Period in the Sengoku, as there is evidence of him working for the Houjou, mentioned as Toda Ittousai. He is said to have defeated a Chinese swordmaster while there.
In the game, he pretty much takes on the role of Date Makoto (from the previous games). He has a semi-official post and helps Kiryuu in any way that he can--even if his superiors wouldn't like that so much."