Why Were We Created?

In the beginning there was God. Then God created the angels to carry out certain tasks for the almighty, sometimes where the presence of God is utterly devastating. When Moses came to our audience, and his Lord spoke to him, he said, "My Lord, let me look at You and see You." He replied: "You cannot see Me, but look at the mountain; if it stays in place, then you can see Me." Then, when his Lord manifested Himself to the mountain, He caused it to crumble, and Moses fell unconscious. When he came to, he said, "Glory be to You; I repent to You, and I am the first to believe." (Al-A'raaf 7:143).      

Creation of Man

One of the archangels, called Iblis {Satan), who had been given vast power and authority, over estimated his importance and started to develop rebellious ideas. He thought he was powerful enough to be a partner of God. Since these ideas were simply internal thoughts, none of the other angels were aware of Satan's outrageous contemplation's. God, of course, was fully aware.

Then your Lord said to the angels, "I am placing a representative on earth" 'They said, "Shall You place therein one who would corrupt it and shed blood, while we praise Your glory and hold you sacred?" He said, "I know what you do not know" (Al-Baqarah 2:30). There were two ways in which to defuse Satan's treacherous plan. He could either be banished from angelhood or immediately punished, or his rebellion could be exposed before effecting retribution. It was the will of the Almighty to uncover Satan's scheme. If Satan's contempt was not brought to light before punishment, the angels may have wondered why God was chastising Iblis when he did nothing wrong?       Satan Exposed

In order to expose Satan as a haughty rebel, God created a lowly creature form clay. He was Adam, the first human being. God then commanded all angels to fall prostrate before Adam.
Then We said to the angels, "Fall prostrate before Adam." They fell prostrate, except Iblis; he refused, turned arrogant, and thus he became a rebel. (Al-Baqarah 2:34).

Satan was exposed as a rebel, and his defiance was certainly a blasphemy of the highest degree, especially when Satan KNEW that God is the Lord of the Universe, and was aware of His power and authority. Consequently, God wanted to show the angels a creature who submits completely to God without ever seeing Him.

Our only purpose in life is to discover God, reach Him, and come to the conclusion that He alone is King and Master, and we must do this without ever seeing him. When you fulfill this purpose you become a believer and God honours you.

He and His angels honour you in order to lead you out of darkness into the light; He showers His mercy upon the believers. (Al-Ahzaab 33.43)

It follows that any human being who totally submits to God is better than the angels. A creature who submits to God without ever seeing Him certainly deserves more credit than a creature who sees God and knows before hand that he is the absolute Lord.
The purpose of our creation is spelled out simply and clearly:
I have not created the jinns and humans except that they may worship me alone.{Al-Dhariyaat 51:56)

Just as the humans are Adam's descendants, the jinns are Satan descendants. When we said to the angels "Bow down to Adam" they bowed down, except Iblis (Satan). He became a jinn, as he violated the command of His Lord. Would you then accept him and his descendants as masters besides Me, even though they are your enemies? What a miserable substitute for the wicked! (Al-Kahf 18:50)      

People on Earth By their Own Choice

Some people may question why God created people and put them through the misery of life, and demand that we worship Him. The fact is that we were not forced into this situation.

The Quran teaches us that we were given a choice, and each one of us decided that we wanted to undergo the test.
Recall that your Lord gathered all the decendants of Adam (before creation, as we know it) and had them bear witnesses on themselves, saying, "Am I not your Lord? They said, "Yes indeed, we bear witness." Therefore, you cannot say on the day of resurrection, "We never knew about this." (Al-A'raaf 7:172)

We had offered the responsibility to the heavens and the earth and the mountains, but they refused to accept it and were afraid. But the human beings accepted it; surely he wrongly overestimated himself.
(Al-Azaab 33:72).

The choices of happiness or misery, both in this life and the hereafter, are completely and absolutely up to us. We can choose to be perfectly happy or utterly miserable

Absolutely, God's allies have nothing to fear, nor will they grieve. Those who believe and work righteousness. They have deserved happiness in this life, as well as in the hereafter. God's decisions are never changeable. This is the greatest triumph.
(Younas 10:62-64)

As for him who disregards My message, he will have a miserable life, and we raise him, on the day of resurrection, blind. (Ta Ha 20:124).