How was Niagara Falls formed?

It was formed by the Wisconsin glaciation ending about 12,000 years ago. Basically, a massive ice sheet retreated, and the meltwater carved out the Niagara River, which then flowed over the Niagara Escarpment—a hard cap of dolomite limestone over softer shale. The water erodes the soft shale underneath, causing the hard cap to collapse, which is why the falls have moved about 7 miles upstream from their original spot near Lewiston, New York.

If you want to see the evidence, head to the Niagara Gorge Discovery Center (it's free with a park pass). You'll see the actual rock layers and a model showing how the falls have "retreated" over time. The rate of erosion is now slowed to about 1 foot per year because they've done engineering work to control the water flow, but the process is still happening. So yeah, the falls are literally eating their way back to Lake Erie.