KOTOR Dev Diary Series open with BioWare Designer Lukas Kristjanson sharing some introductory thoughts.

Set 3,956 years before the Battle of Yavin (the destruction of the first Death Star in Star Wars: A New Hope), Knights of the Old Republic is right in the golden age of the Jedi and the Old Republic. 4,000 years might seem like the distant past, but the Republic has a history going back 25,000 years, beginning with the advent of hyperdrive and the initial bringing together of the galactic community. At game time, the last great battle between the Republic and the Sith Empire, the Exar Kun Sith War, is 40 years past, but the destabilizing effects of it are still being felt. There are many Jedi and Sith, but there is disorder and dissent within their respective groups. The player will find him/herself choosing a path between the two.

Click the above link for more info, and thanks to JP for the heads up.