The debate about the value of the dark side of the Force waged on tirelessly in the Jedi Council. Dissident Jedi argued that the dark power could be controlled and used to further the Jedi cause, but the Council didn't agree. This debate eventually gave way to struggle, then war. This war came to be known as The Great Schism. For one hundred years, Jedi fought Jedi in the first conflict between the light and dark sides of the Force.
Because of greater numbers, the Jedi eventually prevailed and decimated the dark Jedi. The battered, surviving dark Jedi were captured and exiled. They were ordered to take the remnants of their broken fleet across the galaxy into uncharted space and never again darken the doorstep of the Republic.
As they traveled backwater space in exile, the outcast Jedi eventually came across the uncharted world of Korriban. There they found a primitive race of Force adepts known as the Sith. The native Sith knew nothing of the Force and used their untapped power for simple magic. The dark Jedi immediately saw an opportunity. They conquered and enslaved the Sith.
For the next several thousand years, the Sith worshipped the dark Jedi as gods. The rebel Jedi came to call themselves Sith Lords. These Sith Lords used the indigenous people as slave labor to build a great new civilization. Inter-breeding blurred species lines and eventually the term Sith came to mean the off-world, native and hybrid peoples of Korriban.