The Vz61 “Skorpion” was developed for the same reason as the M1 Carbine – as a light and portable weapon for military folks not really suited to having standard issue rifles. People like vehicle drivers, for instance. Talk about different results, though – the US came up with a small version of a rifle, and the Czechs devised a big version of a pistol. Which is better? It depends on your circumstances.
The Skorpion was originally designed in .32 ACP (aka 7.65mm Browning) in a perfect example of the Czechs not following the Soviet lead in munitions. The small caliber made for light recoil and reasonable controllability in automatic fire, and the fixed barrel and wire stock made a valiant attempt at allowing accurate shooting.
On the VZ61 Skorpion page of the Vault, you can find a much more detailed history of the gun, as well as a CZ manual for the automatic variant and a gallery of detailed photos of a Yugoslav-made example (it was adopted as an officer’s sidearm by that nation).