The Times of Chaos were a period in which most of galactic political structure broke down as the Fallen Republic fell. Hundreds of big and small wars took place simultaneously, and without a central government piracy destroyed most interplanetary trade, causing worlds to be isolated and as a result vulnerable to attack, leading to a viscous cycle of destruction.
Before the times of Chaos, there was a stable galactic environment. Though the exact details are unknown, there were several superpowers and these engaged in open trade.
Power was centralized with these superpowers and travel between different parts of the galaxy was comparatively easy - one could be guaranteed they were safe as superpowers maintained order and prevented such things as piracy and other problematic elements. All in all, there was one galactic economy with established trade lanes and a generally free flow of people and goods.
Nobody knows exactly what caused the times of chaos. Perhaps it was economic downturn, political revolt or the likes. We know that the development of new technologies led to centralized governments having a hard time holding on to their power as pirating became easier and more lucrative.
Regardless of the cause, the Times of Chaos are not a one off event, they did not start at any particular time, but rather started at various times in various places as central governments were more or less successful in maintaining order. Regardless of where you were, the Times of Chaos lasted over a thousand years however.
With no central governments, the entire galaxy became a giant failed state. The intergalactic trade networks broke down, hyperspace lanes were lost and entire civilizations rose and fell multiple times over time. As a result, much historic information was lost. Most people couldn't get out of their home system, let alone their sector, with the possible exception of pirates who in turn fell victim to one another.
During this period many worlds, unable to trade due to piracy, were cut off from one another. As these worlds depended on one another for trade, economic problems arose on an unprecedented scale, sending the entire galaxy into a huge recession from which it still has not recovered. Many worlds faced revolutions and those that did not faced huge social change being locked down into a single system.
This is not to say worlds could not have contact at all in the Times of Chaos. Individuals could travel between worlds at great danger and messages could be exchanged, but with nobody to repair infrastructure and no option to trade, many worlds declared the intergalactic community irrelevant as it had little to offer them beyond exchanging niceties - not to mention that many people blamed “the other worlds” for the Times of Chaos.
Over time, technologies changed at different paces in different places, but about a century ago the technology developed to a point where centralized governments could once again hold power over quick-witted pirates and where decentralized groups and rag tag bands of pirates were no longer at an advantage.
This improved access in turn boosted the economy of these worlds which led to the governments that had brought down the pirates rising in power. Soon, they would run into neighbouring states.
Recognising the cost of a full scale war - the destruction of all the advantages gained - some fifty years ago several local powers founded the Union, with Unity as its capital planet. Together they eradicated piracy between them, restored the Bozzy Spine to allow easier trade between them and slowly but certainly new worlds who had been previously cut off were able to join the Union, forming the institution it is today.