Sauron was created by J. R. R. Tolkien for the novels Lord of the Rings and The Silmarillion.
Major Story Arcs
Sauron was the greatest of the Maiar, who were lesser angelic spirits. He once served the Valar of creation and artifice in the earliest days of the First Age of the sun, he was soon corrupted by Morgoth, then known as Melkor, who was one of the Greatest of the Valar, the greater Angelic spirits. Throughout the first age he aided Melkor as his lieutenant and as the Greatest General of his Armies. He helped his Dark Master to create Orcs and Trolls and other despicable creatures in the great pits of Utumno. During the Second Age he took part in several of his master's conquests for power, however was stopped along with Melkor following the loss of the Silmaril Jewels and the War of Wrath after which Melkor's armies were utterly destroyed and all his bases were destroyed.
Following this, he attempted to continue his campaign in Middle-Earth when he was defeated and brought to his knees by the Númenóreans and was brought alone to the island of Númenor. Here he managed to collapse the proud men by convincing them that they didn't need the Valar and that they should be in charge. This insolent act incurred the full wrath of Ilúvatar and he destroyed the island, allowing only a small boat of the faithful to reach Middle Earth, and hence banned Man from returning to the Undying Lands. Following this destruction it took Sauron's spirit many years to eventually return into a physical form.
It was also during the first age that he forged The One Ring out of the fires of Mount Doom. He played a hand in the creation of the seven rings of the Dwarves, and the nine rings of Men, however the three rings of Elves were free of his taint however, and thus he had no power over them. Much to his chagrin, the Dwarves' natural hardiness fought off his control, they did not even become invisible when they donned their rings. But the race of Men was not so lucky, they were corrupted into the Nazgûl, their bodies became invisible and eventually, when they had long passed their natural life span, they became the undead abominations they were most well known for. Sauron's base was in Mordor, the lands surrounding Mount Doom, he created more Orcs based upon his master's designs. He would later create Uruk-Hai, a mix of orcs and men. He erected the Tower of Barad-Dûr a tower crafted of the strongest and magical materials that rose over 5,000 feet tall at the very least, and he used the Eye of Sauron as his coat of arms, a figurative symbol placed upon the flags and banners of Mordor.
Sauron built up his armies and constantly attacked Gondor and its sister realm Arnor. Led by Elendil and his sons, allied with the Elves of Lindon under the Elven-king Gil-galad, and together fought Sauron in the War of the Last Alliance and, after a long period, defeated him in the year S.A. 3441, although both Elendil and Gil-galad were killed.
Isildur cut the One Ring from Sauron's finger and claimed it. Sauron however, did not lose his corporeal form as was depicted in the movies, he was merely forced to retreat. But the ring had a will of its own, and a way of slipping from one hand to be found by another, so that it might at last get back to its master. Isildur was killed and the Ring was lost in the great river Anduin for more than two thousand years. After his defeat in the War of the Last Alliance, Sauron had lost his ability to form a physical body for a great while.
Sauron took the guise of the necromancer, a wizard much like Gandalf or Saruman, for a unstated duration while taking refuge in Mirkwood and building Dol Guldur. There, he agitated many evils in the forests. The Witch King stirred in Angmar and war came to Arnor. Eventually Gollum would find the ring and hold it for over 500 years, well past a hobbit's natural life span. Then it would pass to Bilbo Baggins, who would hold it for fifty years until he gave it to Frodo. Sauron was expelled from Mirkwood when Gandalf discovered who he really was. He returned to Mordor and began preparations for the War of the Ring. A war that would be his last.
The Nazgûl sought out Frodo after learning where The Shire was. After playing a deadly game of cat and mouse, they lost Frodo, with the help of Strider. But the war was just beginning, Saruman, another seeker of the ring, began to unleash his Uruk-Hai upon the nation of Rohan. After the battle of Helm's deep and the Ent attack at Isengard, Saruman was defeated. Sauron soon unleashed his orcs upon Gondor's capital of Osgilliath, and soon the city could no longer take the thousands upon thousands of orcs pouring into the city by boat. They then shifted their focus onto Minas Tirith, a well defended city and second only to Osgilliath in population and importance.
He would lose this battle as the Riders of Rohan charged to assist Gondor at the last second, and the Witch King, mightiest of the Nazgûl and mightiest of his servants whom no man born of woman could kill, was slain by Éowyn, a woman who's mother died in child birth. The Gondorians made a last attack upon the Black Gates at Morannon.
This was merely a diversion so Frodo could take the ring to Mount Doom. Soon Frodo reached mount doom, however, failed at the last moment, unable to resist the power of the Ring at the place of its birth. But Gollum inadvertently saved him by recovering the Ring in a desperate attempt to possess it, and then falling with it into the fire. Thus Sauron's power was unmade, and his corporeal power in Middle-earth came to an end. His spirit towered above Mordor like a black cloud, but was blown away by a powerful wind from the West. Sauron was now permanently crippled, never to rise again.
"If [the Ring] it is destroyed, then he will fall, and his fall will be so low that none can foresee his arising ever again. For he will lose the best part of the strength that was native to him in his beginning, and all that was made or begun with that power will crumble, and he will be maimed for ever, becoming a mere spirit of malice that gnaws itself in the shadows, but cannot again grow or take shape. And so a great evil of this world will be removed." --The Return of the King, The Last Debate
As one of the Maiar, Sauron is extremely powerful. He was a Maia to Aulë the smith and had great skill in crafting and metal works. This not only meant that he had incredible arms and armor for himself and his greatest servants, but his skills in commanding fire were absolute. After all, his very physical touch killed the High King Gil-galad with searing flame. As demonstrated during the closing hours of the War of the Last Alliance, Sauron's physical power itself is beyond any mortal's comprehension, even more so than the monstrous trolls or the enigmatic Ents. He rivals the strength of the demonic Balrog spirits that haunted the days of the First Age.
But Sauron's most dangerous power lies in his corrupting wiles and charm. He is a master of deceiving even the most adamant of souls, as demonstrated when he not only tricked the Elves into receiving the dread Rings of Power but Galadriel herself he also persuaded the most powerful and noble of men (Númenoreans) that they could defeat the immortal Valar. He took the jealous hearts of the Southrons and Easterlings into his service, giving them the opportunity to fight against Gondor.
Sauron also possessed the ability to alter the very physical substance of the world around him and he could destroy many enemies with a single strike of his mace.
The One Ring
For mortals, The One Ring merely gave the wearer the power of invisibility. But the Dark Lord's will was concentrated in the One Ring, a construct so irresistible to mortal creatures that to merely look upon it is to invite him into your mind. None could resist the Ring for long and those who had prolonged exposure to it became obsessed with it to the point of committing murder just to hold it. Sauron constructed the Ring as a fail safe against the still-dangerous Dúnedain lordships as well as the powerful, yet waning, Elven kings that dominated the West. He wanted to make sure that he would be able to resurrect in a time and manner convenient for him so that not even the most potent of elvish weapons could kill him permanently.
When the One Ring and Sauron were united, they were whole. Sauron was made unstoppable on the field of battle and his powers of corruption were impossible to ignore. He dragged nine of the great kings of Men into ruin and the Elves feared the same for their own race while the Dwarves tunneled underground and invited a different doom of their own (Durin's Bane).
The infamous inscription upon the Ring reads:
Ash nazg durbatulûk,
ash nazg gimbatul,
ash nazg thrakatulûk,
agh burzum-ishi krimpatul.
Roughly translated, it means:
One ring to rule them all,
one ring to find them,
one ring to bring them all,
and in the darkness bind them.
Peter Jackson Movies
Sauron's role in the films is more of a visual and addable presence than in the novels, where is actions are only described by others. In the movies he depicted as flaming eye spirt that cannot regain physical form. In the book the eye is only a symbol and he had various physical forms long before Fellowship of the Ring.
In the Hobbit prequels Sauron was known as the Necromancer of the North. During this time the Witch-king established the kingdom of Angmar, destroying Arnor. The Istari formed the White Council to guard against Sauron's return. Gandalf traveled with a group of Dwarves to defeat a Dragon called Smaug, fearing that the worm could make a future alliance with the Dark Lord. The White Council manage to drive Sauron's spirit away from the north.