The One Ring was the greatest of the Rings of Power, forged by Sauron in the fires of Mount Doom. As he created it, Sauron poured his cruelty, his malice and his will to dominate all life into it- his very essence. Inscribed on the ring in elven, in the tongue of the Black Speech or Mordor were these words:
Ash nazg durbatulúk,
ash nazg gimbatul,
ash nazg thrakatulûk,
agh burzum-ishi krimpatul.
Translated into the Common Tongue it reads as:
One Ring to rule them all,
One Ring to find them,
One Ring to bring them all,
And in the darkness bind them.
With the One Ring, the Dark Lord completed his fortress of Barad-dur, and gained the power to command the wearers of all the other Rings. He began by transforming the nine ring-wielding kings of Men into the Nazgul. The elves, realizing the danger, stopped wearing their rings- the dwarves apparently did the same.
With the power of the One Ring, Sauron waged war and chaos, until finally, while facing the Last Alliance, he was slain by Isildur. Elrond urged Isildur to destroy the Ring, which now contained the last vestiges of Sauron's power- but the One Ring immediately exerted a fell influence on the new king, tempting him to keep it. Isildur grew more and more attached to the Ring, discovering its power to turn its wearer invisible. However, others were drawn to Sauron's Ring as well. The One Ring abandoned him, drifting in a nearby river, leaving Isildur to be slain. None of the great powers of Middle-Earth could find the Ring, even Saruman the White, who grew obsessed with the search.
The Ring remained in the muck of a riverbed for many years, until it was found by the cousins Deagol and Smeagol. The two hobbits were corrupted by the Ring's power, and battled to the death over it. Smeagol was victorious, but he was exiled into the Misty Mountains. For hundreds of years, Smeagol- now Gollum- dwelt in the Mountains, given long life by the Ring (his "precious"), but it also horribly twisted his body and mind.
One day, sensing the time to rejoin Sauron was coming, the Ring found its way to the hobbit Bilbo Baggins. Bilbo didn't know what he'd found, but he kept it, and it gave him vitality well into his 111th year of life. Bilbo passed the Ring to his young cousin Frodo, who kept it for a time. Soon, however, Sauron sent his minions to retrieve the One Ring. Gandalf the Grey learned the true nature of Bilbo's find, and warned Frodo to flee with the Ring to a nearby town of Men, where they would meet. Unfortunately, Gandalf was captured by Saruman, but Strider took Frodo and his hobbit companions to Weathertop. There, the Witch-King of Angmar wounded Frodo with his Morgul blade, and the hobbit was rushed to Rivendell.
Elrond summoned a council with representatives of each race of Middle-Earth, in order to decide what would be done with the One Ring. Boromir of Gondor favored using the Ring against Sauron himself (already feeling the call of the Ring's power), but the others agreed it must be destroyed. Thus formed the Fellowship of the Ring, a band which would take the Ring to the one place it could be destroyed- Mount Doom, the place of its creation. Frodo Baggins was chosen as the Ringbearer, and the group set out for Mordor.
Along the way, the Ring began to exert more and more power over Frodo's mind. Frodo tried to give it to Galadriel, who was tempted but passed the "test." After the Fellowship lost Gandalf at Moria, Boromir briefly succumbed to the Ring's power and tried to seize it from Frodo. Distraught, Frodo broke from the Fellowship, taking Samwise Gamgee as his sole remaining companion. They were joined by Gollum, who served as their guide but was truly waiting to steal back his "precious."
Gollum took Frodo and Sam into Mordor, but attempted to feed them to [Shelob] in the hopes of taking the Ring from their corpses. Gollum fell to what seemed his doom, while Frodo was captured by orcs. Samwise took the Ring briefly, and freed Frodo. The pair finally made their way to the Cracks of Doom, evading Gollum again. However, at the last minute, Frodo's will to resist the Ring shattered. He would have left with the One Ring, consumed by evil, had not Gollum attacked him. Gollum and the Ring fell into the Cracks, and the Ring was finally destroyed.