If my Silmarillion memory serves correct (I had to read that thing like 4 times to get a good scope of matters), There was a cool god-like-guy, who got lonely, and created that Valar, which were like demi-gods, and gave them the LOTR world (A-something. I wanna say Arla, far too hating this laptop to look it up.)
Then there was Melkor and Manwe, the two most powerful, Melkor was bad, Morgoth, blah blah... fast forward. The Valar then decided to create beings called Maia, all of em made some, Melkor made a particular nasty one named Sauron, who escaped the craziness that was the first few ages, then the elves and humans decided to sail across the sea to Middle Earth and Sauron hitched a ride, and I could go all day, but Sauron was basically the mini-boss, while Melkor is trapped away.