The world of Middle-earth is a beautiful, strange and mystical place. It is very similar to how europe looked like long ago. Big forests, great mountains, fields, lakes and seas. The making of this world is described in Silmarillion.
Many thing has happened in these lands, things long forgotten. Iluvatar, the one god created a world with the help of his children. They planned and formed a beautiful place. Though it did not last, because one of his children had the desire to wreck, destroy and manipulate the work of his brothers and sister. They created new things and he destroyed it and so it went on. His name was Melkor, but was called Morgoth. The other gods decided to take him out once and for all and they took him prisoner in the Aman, the blessed lands to the west. The world was beautiful once again at least for a while. Morgoth escaped and with the help of Ungoliant, a big terrible spider, he destroyed the trees of light and the world was left dark. Then he traveled back to Middle-earth and continued his terrible actions.
The other gods created a new light to shine upon the world, the sun. And life started. First were the elves, the blessed race. They traveled west to Aman in search of the gods, but some stayed behind and some were manipulated by Morgoth to a terrible, ugly raced called the orcs.
Then came the dwarfs and the humans which decided to stay in Middle-earth. The dwarfs lived in caves deep into the mountains. The human lived out in the wild. Morgoth did not know of this human race, but he found out they could easily be turned to evil and so many of them were corrupted. But some had elven blood in their veins and became a prosperous people.
Morgoth was later after many wars defeated and the world could rest once more, but some of Morgoths servants survived. One of them was Sauron. He was later to have a big role in the future of Middle-earth as told in Lord of the Rings.
Besides Humans, dwarfs and elves there are other creatures. There are goblins, trolls and there are hobbits which live in the shire. Still there are many strange creatures and strange places in this world. Read the books and ravel there, experience it!
If you'd like to know more about the creation and prehistory of Middle-earth read Silmarillion.