There are, as far as I know, three main theories as the how the Northern Crater was formed. The most common one is that Jenova fell to the Planet and the impact formed the Crater, but the other theories are equally as believable. Each one is summarised below:

Theory 1
Jenova is an alien from outer space. She crashes to the Planet (earning her the nickname "Crisis/Calamity/Disaster from the Skies") and the impact forms the Crater. The Cetra seal Jenova away within the Planet, although Jenova kills most of them by spreading a virus that makes them turn into monsters. The Planet creates the WEAPONs to protect itself in case Jenova should ever be freed, or it should ever face a similar threat.

Theory 2
Jenova is an alien from outer space, who wants to take over the FF7 Planet for whatever reason. More info about what her reasons could have been is on the what is Jenova? page. Anyway - Jenova summons Meteor before she falls to the Planet, and it's the impact of Meteor (rather than Jenova falling) that causes the Crater to be formed. Once Meteor has been fully cast, Jenova falls to the Planet and befriends the Cetra, who are too busy cleaning up the mess to notice that Jenova is actually evil. She then spreads the virus which turns them all into monsters, although a few escape and manage to seal her away within the Planet. The Planet feels that Jenova is evil, and creates the WEAPONs to protect itself in case she escapes.

Theory 3
Jenova is actually a Cetra, who turns evil and desperately wants/needs to take over the Planet for herself (for whatever reason). Somehow she acquires the Black Materia and the knowledge that allows her to cast Meteor, which she goes on to do in order to damage the Planet. The impact from Meteor causes the formation of the Northern Crater. To complete her plan, Jenova attempts to wipe out all the Cetra by spreading a virus that turns them all into monsters. A few of them escape unscathed, however, and manage to seal Jenova away within the Planet. At this point the Planet creates the WEAPONs to (guess what!) protect itself in case Jenova escapes. Two thousand years later Sephiroth arrives thinking that Jenova is his mother, and ever-so-conveniently plans to take over the world for her - she would achieve what she always wanted to, even if she did have to wait two thousand years for it to happen. The pair don't even have to worry about the WEAPONs, since Cloud and co. dispatch them all.

I'd be interested to hear your opinions on this issue. If you'd like to comment, drop me a line and I'll add your opinion to this page.