[j. d. worthington]

Well, I'm not Marky, but I'll undertake to answer that. This is not something you'd gather from the films, though. It's from the book's appendices, and even more from The Silmarillion. Both Gandalf and the Balrog of Morgoth are of the order of the Maiar, an order somewhat lower than the Valar, or Powers of the World. Morgoth, or Melkor, as he was originally called, was of the order of the Valar, one of those who helped to bring the world into being by their Music, through the Will of Iluvatar, the One (not to be confused with the One Ring -- this is the ultimate One, God, if you will). But Melkor, like Lucifer, fell through pride into striving against the will of Iluvatar, and once the Middle-Earth was made, he did all he could to mar or unmake what his fellow Vala had achieved. He also corrupted certain Maiar of the people of Aule, the Vala smith, and through promises of great power brought them under his sway. Because of this corruption, and the fact that they were spirits of fire to begin with, they became an evil flame, one which could only be used for destruction and harm rather than growth and healing. Their form became that of a deep shadow wreathed in flame, bestial and malefic, just as Melkor's original majesty became warped through his malice into the fearful majesty of a Dark Lord. Sauron himself is of the order of the Maiar; he was the greatest servant of Melkor (renamed "Morgoth" or "The Dark Enemy of the World" by Feanor of the Elves after Melkor slew his father in quest of the Silmarils). Sauron could also take the form of a wolf, or werewolf, which he often did during the First Age. It is believed by some that he lost this power following his defeat and physical destruction at the end of the Second Age, when he lost the ring, and could only be seen in the form of a burning eye of malice, with a pupil that was an empty void, reflecting the nothingness within him.

That help? If you've not read the books, they really are very good, and full of rich textures and very deep history; Tolkien's may be the most fully realized world of historical profundity in all fantasy. Others have tried, but Tolkien may well have given his more depth than any before or since.