The Istari, or Wizards, were the five emmisiaries of the Valar, whom were sent forth in about 1000 of the Third Age to guide the Free Peoples of Middle-earth towards good. They were also sent to give counsels to the people about how to deal with Sauron. They were forbidden to try to dominate the people of Middle-earth, and were told not to try to match Sauron's power with their own. Just before the War of the Ring, the greatest of the Istari, Saruman, disobeyed his orders, and he purposed to take the One Ring for himself, and to put an end to Sauron with power. Since this was forbidden he was cast out of the order and replaced by Gandalf. He was also banished from Valinor before being killed by Gríma Wormtongue. At the End of the Third Age the Istari passed from Middle-earth to the West. Gandalf sailed with Bilbo, Frodo, Elrond, and Galadriel at End of the Third Age.
The Istari were bound to bear the forms of old Men, though they were often more energetic than young Men, and did not age, unless very slowly. They were powerful through body and mind powers, though most of their energy had to be channeled through their staves. Each Wizard was issued a grade with the order, for example, Saruman was "The White," and was the head of the order, before the War of the Ring. Gandalf was "The Grey," second of the order, and Radagast was "The Brown," though his position among the Istari is not known. The identities of the other two Wizards are unknown.
Many believe that the Istari were Maiar, servants of the Valar. This is the only theory that is actually backed up by proof, for their was once a Maiar named Olórin, and that name was used by Gandalf before he entered Middle-earth.