The Forces of ChaosChaos is kinda terrible. It all kinda lives in a universe parallel to the 40K universe, and is inhabited by demons and malicious energy...it's really a bad place. It is governed by the four gods of Chaos: Khorne, Nurgle, Tzeench, and Slaanesh. Khorne is the Blood God, a vicious warrior that is appeased by bringing skulls to his infamous skull throne. It may seem cliche, but this was the guy who was doing it first, and made it badass. Nurgle presides over disease and decay, and thrives on infection and infestation. He is actually a rather cheerful god, despite his sour business. Tzeench is the great sorceror, and is the Lord of Change. In a roundabout way, he actually created magic, or at least unleashed it into our universe. And finally, Slaanesh is the Dark Prince of Excess. Born from the corruption of the Eldar, he is fed by desire and the depraved acts performed to sate curiosity, lust, or any other emotion. Unfortunately for the 40K universe (not Chaos), all psychic power is really channeled power from the Warp, which is why it really is dangerous to be a psyker; demons will try at any point to inhabit or take over a host psyker. It is a dangerous place.
The Forces of Chaos are divided into two main factions: the Demons that inhabit the Warp, and the traitor legions known as the Chaos Space Marines.
The Chaos DemonsThe Demons of Chaos...well...they're Demons. They hang out in the Warp, usually the tortured souls of psykers or devotees of Chaos that have since died and are now subjected to eternal torture in Chaos. Not a pleasant way to spend an afterlife.
A little bit of history...There is no true history for Chaos, since there is no true time in the Warp. Yep. Think about that one for a while.
In any case though, the Warp is populated by Demons. Each god has their own followers, and they scurry around squabbling with each other for control of Chaos, which no god ever really gets. Tzeench was in control for a long time (theoretically...), but the fight is ongoing.
In reality...The Chaos Demons are a formidable foe. Unfortunately, due to the heavy melee based infantry and the odd deployment rules for the army, you really have to be careful how you deploy your troops and where. Nonetheless, the fact that all Demons have invulnerable saves and are Eternal Warriors is pretty freakin' badass. Oh, and the fact that they have Kairos Fateweaver as an HQ choice, who has a 7% chance to be killed. Good luck with that.
The Chaos Space MarinesThe Chaos Space Marines are made up of the Traitor Legions that were turned during the Horus Heresy (that whole thing with the Emporer and Horus leading a Chaos revolt...come on). Considering Chaos got their hands on some of the biggest badasses in the Universe, and given them Chaos gifts, they're pretty freakin' awesome.
A little bit of history...If you haven't read about the basic idea of the Space Marines and the Horus Heresy, pop on over to the The Imperium of Man page to check that out.
Anyways, so after the Heresy, the Traitor Legions retreated into the Warp. Many legions broke off and followed different gods, and some from there became entirely different than the original Space Marines. For example, some Marines that follwed Nurgle became Plague Marines, spreading filth and decay everywhere they went. They're very tough (considering they've got a good layer of crust on 'em), and really JUST DON'T DIE. Followers of Slaanesh became Noise Marines, indulging their foes in very, very loud psycho-sonically pyrotechnic attacks. Yeah, science that out. Anyways, they all still fight for Chaos, and have a burning hatred of their parallel brothers, the Space Marines.