It started to become more like it is now in in 1874, when the Aoba shrine was built. The festival was moved to May to commemorate the anniversary of the death of Date Masamune, the founder of Sendai. Although it has had periods of being more or less popular since then, it was renewed with vigour in 1985, the 350th anniversary of Date's death, and has been very popular ever since.
Probably the most important (certainly the biggest) part of Aoba-Matsuri is Suzume Odori. Suzume Odori means Sparrow dance, and it supposed to date back to the building of Sendai Castle in 1603. Allegedly, a group of stone masons from Osaka drunkenly burst out with this dance. The idea of a group of burly stone masons spontaneously bursting out into a very feminine dance seems rather unlikely to me, but obviously the idea of the modern man hit Japan a little earlier!
Now, children all learn it at school, every Sendai workplace seems to have a Suzume Odori club, and there are lots of fun clubs too. They perform at pretty much any event they can, but Aoba Matsuri is the biggest deal. Most of Saturday was dedicated to a Suzume Odori dance competition, and there were apparently around 3000 dancers in Sunday's parade too.
A video of the dancers in the parade
NTT Docomo (a mobile phone company) had a group of dancers, including one wearing this scary mask!
A Sendai sweets maker had all their dancers dressed in pink. I'm guessing this was every little girls favourite!
They'd been dancing for about 5 hours by the time they got to us (not counting everything they'd done the day before), so most of the children (and some of the adults) were less than enthusiastic!