600 B.C. was roughly the beginning of the Mahajanapadas (Great States). It saw the beginning of not only small kingdoms, but also major urban centers. The era is marked by the transition from Painted Greyware to Northern Black Polished Ware. NBPW was a luxury item used by the new urban elites. Parallel with the growth of cities was a major increase in long distance and foreign commerce. All of these things led to a new economic and political situation which the Brahmans could not maintain control. Ideologically, Brahmanism failed to capture the minds of the new Urban class. It had come to include dozens of archaic gods. To become a Brahman, one had to memorize the entire Vedas. These grew in size, and the memorization become more and more tiresome.
In the 6th century B.C., Amidst these social and political upheavals, the Sramanas appeared in Maghada, and neighboring Videha. These were philosophical movements professing a simpler doctrine of aestheticism and liberation. The adherents of these ideologies were naked mendicant-yogis who lived in the woods. Alain Danielou, who lived and studied in India, said that these Yogis were preservers of an indigenous Harrapan tradition which had moved underground when the Aryans arrived. Indeed, one of the meditations of the Shivaites was to feign madness, by which they would avoid persecution and be left alone. Many of them were darker skinned Dravidian types. Their wisdom attracted the ears of the new urban class.
The revolution was very much commercial. The adherents to Buddhism, a Sramana movement, were Brahmans who were successful merchants. Hinduism wasn't accommodating to the needs of merchants. After all, merchants were the second lowest of the four classes. It didn't guarantee their safety, or the unimpeded movement of goods. Their ability to do business was at the whim the local Brahman priests. Buddhism, with its universal clause of non violence, allowed for the unhindered flow of commerce, which translated to wealth. Kingdoms had a vested interest the flow of commerce. Politically, Buddhism had another caveat. The burgeoning amount of hindu gods had the effect of chaos and disarray. The simple, unified message of dharma helped create political uniformity. This was definitely the motive for Ashoka's conversion. He incorporated these political and economic elements into his ideology of "peaceful conquest".
Hinduism was ultimately adaptable to less archaic governments and economies. It just so happened that Buddhism filled a particular niche when it opened up. By the present era, Vishnavism and Shivaism were created, which also served as a counterweight to Brahmanism. Vishnavism, for instance was popular with foreign merchants in the ports, who probably would have earlier been Buddhist. Buddhism appeared more like Hinduism after the creation of Mahayana Buddhism.
Alternately, I recommend reading Tornada's blog about the point of view of the authors of the Mahabharata. It explains how they viewed the expansion of Maghada from a Hindu perspective, decrying the violations of sacred Kshatriya-kings rights. It's shows how the two world views clashed, and ultimately Buddhism prevailed.
