Lord Theon Greyjoy is the gret-grandson of the current lord of the Iron Islands, Quellon Greyjoy. To better relations with the mainland, Lord Quellon arranged matches for much of his family with mainlanders. In Theon's case, to better relations with the North, Theon was sent to foster with Ned Stark in Winterfell.
During his first trip to Winterfell, which he was accompanied by his great-grandfather and parents, his grandfather Balon Greyjoy declared himself king of the Iron Islands and threatened the travelling Greyjoys with death should they ever return.
This resulted in the Greyjoy Rebellion, which resulted in Balon's death.