From what I can tell from reading the various comic series, care of Dark Horse Digital, the entire Galactic History consists of different eras where either the Sith are all wiped out or the Jedi are all but extinct, interleaved with eras in which both are at war. Basically the writers come up with some new method to keep massive conflict in the galaxy, with our stalwart heroes or anti-heroes fighting against desperate odds.
Anyway here’s the rough background for SWTOR:
The Sith were thought to be extinguished, and the Jedi and the Republic ruled the galaxy. It turns out though that some of the Sith actually got away, and were rebuilding their society in secret on Dromund Kass (which is the second planet in the Imperial questing line).
Hundreds of years after they were thought to be wiped out, the Sith make a surprise attack on Korriban, their ancient birthplace. This is the opening cinematic for the game. This was the first indication to the Jedi that the Sith in fact still existed. With this attack, the Sith ignited a war that engulfed the galaxy, and the Republic was doing badly. IIRC at some point during the war, the Emperor agreed to meet for peace talks, for reasons which are not known. But while the peace talks were taking place the Empire mounted a surprise attack on Coruscant. This is the cinematic that plays when you first decide to play a Republic character. The Empire’s surprise attack wiped out the Jedi Temple, and IIRC the Empire actually took over Coruscant.
With control of Coruscant the Empire was able to force the Republic to agree to whatever demands it wanted in the ongoing peace talks. The result of the peace talks was an end to the war. As of the start of the game, the galaxy is nominally at peace. However, there is actually a “Cold War” going on that occasionally heats up in different parts of the galaxy.
As the Sith wiped out the Jedi Temple, the Jedi retreat to Tython their ancient birthplace to lick their wounds and rebuild their order.
There is fighting to sway Hutta and other non-aligned worlds, and spies and various Republic and Imperial agents are working covertly and sometimes overtly to sway different worlds one way or the other. A broader peace still mostly holds, but everyone expects that it will fall apart sooner or later and we’ll have open war. One way to think about this situation is our real life Cold War in the 1950-1980, where US and allied nations engaged in small scale wars in Korea and Vietnam, and the Russian’s fought in Afghanistan and used proxies in Korea and Vietnam. Some fighting between the two sides, some hot zones, but no broad WW3.
What’s still unknown is why the Emperor bothered initiating peace talks, as the Empire had the upper hand when the peace talks started and could have pushed his advantage.
You can see a very quick summary here:
http://www.swtor.com/info/story/setting
More extensive information including some info on how this ties into KotOR 1 and 2 can be found here:
http://www.swtor.com/info/holonet/timeline