The first point that should, perhaps, be made is that this is not the Star Wars you may be expecting. It's set thousands of years before the original trilogy of films, four years after the Mandalorian Wars, when an alien race of warriors swept across the Republic for no reason other than because it was there. The Mandalorians were beaten back largely because of one person: Revan, tactical genius and Jedi Knight.
In the years after the wars, however, Revan went missing. The Republic began to rebuild, in the wake of a war that had destroyed dozens of planets and left at least one entire species without a home. Then, suddenly, Revan reappeared, now known as Darth Revan, a Lord of the Sith. At the head of a seemingly infinite armada, he rampaged across Republic space, only being pushed back because of the powers of a Jedi named Bastila Shan.
As Knights of the Old Republic begins, Revan is thought dead at the hands of Bastila, but his apprentice, Darth Malak, has stepped up to replace him. The Sith know full well that Bastila is the only thing standing between them and complete victory, so naturally, they're out to capture or kill her. They make their move when an exhausted Bastila is traveling aboard the Republic starship the Endar Spire. In the middle of a full-on Sith assault on the ship, your main character wakes up, and the story begins.
Knights of the Old Republic, like Bioware's Neverwinter Nights, is a sort of simulation of the d20 role-playing system. It's more or less a faithful recreation of the most recent Star Wars RPG, which is to say, it's pretty much third-edition Dungeons & Dragons with Jedi instead of mages. You create a character from scratch, picking one of three classes (scoundrel/thief, soldier/fighter, scout/blend between the two), and assign attribute points and skills as you see fit.
There's an amazing amount of customizability in the game, between the wide variety of character models and the areas of expertise your character can have. If you want, you can specialize in computer skills, stealth, and demolitions, and wind up with a character who does most of his damage via planting traps, stabbing people in the back, and hacking local computer systems. Alternatively, you can throw all your skills into straight-ahead combat, and wind up with a character who is equally deadly with blade, blaster, or bo staff. Eventually, your character will acquire Force powers and learn how to use a lightsaber, adding a third dimension to the mix.
Your supporting cast shares in some of that flexibility. While each of your backup characters comes into the game with certain skill sets already in place -- Canderous Ordo is designed to shoot large guns at people, Zaalbar the Wookiee is most at home tearing into someone with melee weapons, etc. -- you're free to mess with those, to some extent. It'll sometimes be an uphill battle to recreate a given pre-existing character into whatever you want them to be, but with enough stat-boosting equipment, which in turn is frequently modifiable using spare parts and a handy workbench, you can usually make it happen.
The end goal of all this manoeuvring is, of course, to make your characters hurt people more efficiently. While there's a great deal to do in Knights of the Old Republic, from gambling to swoop racing to exploring ancient ruins, there is a war raging, and you're in the middle of it. Try as though you might, you will be fighting quite a lot, against everything from horribly overmatched Sith troops to angry full-grown Rancor beasts.
When a fight does break out, it largely takes place on automatic. You control one character at a time, attacking with special combat manoeuvres ("feats"), grenades, or Force powers, while setting up to two others to behave according to one of three predetermined scripts. You can pause the action at any time with the White button to rethink your current strategy, and switch between characters at will with the Black button. While it does seem painfully arbitrary at first, and has a few obvious issues, such as an enemy being able to connect a melee attack against you despite the fact that you're running like hell in the other direction, you'll get used to it quickly, especially if you're conversant with the d20 system the game is based upon.
Much of the rest of the game boils down to how you choose to interact with the characters around you. As your character is a Jedi, the threat of falling to the Dark Side is omnipresent. You begin perfectly balanced between the Light and Dark sides of the Force, and as you progress, your choices in conversations with others determine which way you fall. If you're compassionate and go out of your way to help people, you'll rack up Light Side points like crazy. If you lie, cheat, steal, and kill anyone who has so much as a shiny credit, then, yes, you'll be falling to the Dark Side before you know it.
The game itself doesn't reward or punish either choice. While you'll have a hard time using certain powers if you're strongly aligned with the wrong side of the Force (the Light side is a big wussy and frowns on the use of Force Lightning), and there are some weapons and items that can only be used by a Jedi aligned with a specific side, you can play through the game both ways to completion and be rewarded with very different gameplay experiences. A Dark Jedi tends to clean up on credits and items, usually because he's browbeating them out of everyone to cross his path, while a Light Jedi nets tons of XP for her good deeds.
All in all, this is a satisfying and addictive RPG experience, with tons of replayability owing to character flexibility and the alignment chart. I'm not a Star Wars fan in the least, and I still found myself having a pretty good time. It does deviate from canon in some ways, and I've seen more than a couple of the hardcore "Warsies" working themselves into a lather over the liberties KotOR takes with Star Wars history and culture. Personally, I count that as a point in the game's favor; the more the fanboys hate something, the better I tend to like it.
There is one serious, cautionary note that I should end on, though. Knights of the Old Republic is one of the single glitchiest pieces of software I've ever seen in my life, particularly on a console. It loads extremely jerkily, characters fade in and out, it freezes up every so often, and has at least one devastating bug near the end of the game that will simply force you to start over. (I speak of the horrible "Carth Glitch," as detailed in the Glitch FAQ at gamefaqs.com. In a perfect world, the inclusion of this glitch in the final product would mean that at the next E3, Bioware's booth will include a "Hit Our Bug-Testing Department With a Forklift" game, which we can all play to win fun prizes.)
While I don't doubt that there'll be patches a'plenty for the game, sooner or later, that doesn't change the fact that you have to be an Xbox Live subscriber to get the patches. The glitches don't render the game unplayable, but I lost twenty-seven hours of gameplay because of them, so I consider them a pretty serious drawback.
You've been warned. If you're still in the market for an immersive, versatile RPG set in the Star Wars universe, then Knights of the Old Republic is the game you've been waiting for. Just be sure to save frequently, and keep multiple saves, in case the glitches strike.