Sauron was a Maia, as is already said, in the service of Aulë. Early in the First Age he was corrupted by Melkor the Morgoth. He became the Lieutenant of Angband and Melkor's chief servant. The Istari are also Maiar, but Sauron wasn't one of them. The Istari were sent by the Valar to help the people of ME against Sauron. Chief of them was Saruman, but Gandalf was the chief-enemy of Sauron as Cirdan percieved when he came to ME. That's also the reason why Cirdan gave Gandalf the Red Ring, Narya, ring of fire.
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The One Ring was his tool, and it was very powerful, because it was created by the elves
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The elves did not make the One Ring. Sauron made it himself in the Cracks of Doom, in Orodruin. The elves made all the other Rings of Power, chief of these were the Three. Sauron made the One to rule all other Rings, and the ones who posessed them. In this way he later ensnared men, and they became the Nazgûl. By the making of the Ring much of his power went forth into the Ring (as with Feänor and the Silmarils for he could not make them again).
When he had made the One Ring and put it on his finger, the elves were aware of him. They hid the Three for they were unsullied, because Sauron had never touched nor seen them. All the other Rings of Power Sauron gained in his possession (and some the dragons consumed). Sauron chiefest thought was to gain the Three as well and become all-mighty. But then the free species made The Last Alliance and Sauron was overthrown and the One Ring was cut from his finger. Isildur, who had the Ring, was trapped by orcs and Ring was lost at that time, until it was found by Deagol.
Sauron had to gain the Ring in his possession again to become all-mighty. He didn't need the Three anymore, because the power of the elves was diminishing. They were few and formed little threat, according to him. All his power was now set on gaining the One Ring. Why he 'died', when the Ring was destroyed, I don't really now. Maybe someone can answer that question for me.
Hope this will do.
greetings,
lathspell