Background

The historical background of the story of The Lord of the Rings is revealed as the book progresses, and is also elaborated upon in the Appendices and in The Silmarillion, the latter published after Tolkien's death. It begins thousands of years before the action in the book with the eponymous Lord of the Rings, the Dark Lord Sauron, who secretly forged a Great Ring of power, the One Ring, to enslave the wearers of the other Rings of Power. He launched a war during which he captured 16 of the Rings of Power and distributed these to seven and nine lords of Dwarves and Men respectively; the Men who possessed the Nine were corrupted over time and became the undead Nazgûl or Ringwraiths, Sauron's most feared servants. Sauron failed to capture the remaining Three, which remained in the possession of the Elves. The Men of the great island-nation of Númenor helped the besieged Elves in the war, and much later they sent a great force to overthrow Sauron, who surrendered, and was taken to Númenor as a prisoner. However, with cunning Sauron poisoned the minds of the Númenóreans against the Valar (deities in Tolkien's mythos) and deceived them into invading the Undying Lands, for which act Númenor was destroyed. Sauron's spirit escaped to Middle-earth, as did some Númenóreans who had opposed the invasion, led by Elendil and his sons Isildur and Anárion.
Over 100 years later, Sauron was at war with the Númenórean exiles who had established themselves in Middle-earth. Elendil formed the Last Alliance of Elves and Men with the Elven-king Gil-galad, and they marched against Mordor, defeating Sauron's armies and besieging his stronghold Barad-dûr; Anárion was killed during the siege. After seven years besieged, Sauron himself came forth and engaged in single combat with the leaders of the Last Alliance. Gil-galad and Elendil were both killed as they fought with Sauron, but Sauron's body was also overcome and slain. Isildur cut the One Ring from Sauron's hand with the hilt-shard of Elendil's broken sword Narsil, and when this happened Sauron's spirit fled into the wilderness. Isildur was advised to destroy the One Ring outright by casting it into the volcanic Mount Doom where it was forged but, attracted to its beauty, he refused and kept it as weregild (compensation) for the deaths of his father and brother.
So began the Third Age of Middle-earth. Two years later, Isildur and his soldiers were ambushed by a band of Orcs at the Gladden Fields. Isildur escaped by putting on the Ring — which made mortal wearers invisible — but the Ring betrayed him and slipped from his finger while he was swimming in the Great River Anduin. He was seen and shot dead by Orcs, and the Ring was lost for two millennia on the river's bottom.
It was then found by chance by a river hobbit named Déagol. His relative and friend Sméagol killed him for the Ring and was banished from his home. Sméagol fled into the Misty Mountains where, corrupted by the power of the Ring, he became a loathsome, slimy creature called Gollum. Much later, as told in The Hobbit, another hobbit, Bilbo Baggins, seemingly accidentally found the Ring in Gollum's cave, and took it back to his home, Bag End, unaware that it was anything more than just a magic ring.