Two races warring in the space.
A strange (player controlled) psychic entity.

Why are they fighting?
Who are you and where are you going?

If you want to know the answers...
THEN GO AND PLAY THE GAME, BECAUSE IT'S F***ING AWESOME!!!
Alternatively stay here and read what I've found out.
AND THEN GO AND PLAY THE GAME!!!

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What you will find here is a lot of spoilers and a plot seen from two sides (Human and Aratus).
There's also a third - secret - race, but I'm not skilled enough to get it's plot/ending. Consider it a challenge for you...

Anyway! - Let me start from the obvious:

It is a future. A distant future. There is no specific date, but it is distant enough for humans to have starships capable of interstelar flight, giant gatling railguns, graviton condensers and other future things.

What is known, is that it's been about a thousand years since humans left the Earth. It was too polluted to live there.
They traveled through some wormhole (which later collapsed), settled down on a new planet - and called it Terra (lat. Earth :|).
Later (?) they've established some colonies (though it's unknown how many). One of the most notable ones was a Nupitt - a mining colony located amnig arteroids.

That's where majority of (if not whole) game takes place. And that's where humans - after a few decades of colony's existence - found a new wormhole back to the old Earth.
There was a plan to recolonize it (after a proper terraformation), but it failed, because the old Earth has been occupied by Aratus! Aratus destroyed men's ships (expeditionary force, I guess) and used the wormhole to attack the Nupitt.

What are they? Basically... squids. Yes, these squids! When humans left the Earth, squids were still alive and over time they managed to evolve into sentient, inteligent beings (yet, they didn't develop full resistance to the substances polluting the planet :|). They learned from whatever the humans left behind (mostly machines), but apparently because of mentioned lack of resistance, Aratus' life span was too short for them to make a significant progress.

And then the Singer came (I'll writhe more about him later) and united all of the Aratus, by establishing some kind of psychic bond between all of them (the Song), a collective consciousness. It enabled them to share their konwledge and memories, but also to forget about the pain caused by the toxic environment. Singer - as a 'higher being' - had also a better understanding of technology. Both of these things led Aratus to a huge technological development. They managed to create bio-technological machines, made of their pilot/operator's DNA, linked to them on a neurological level.

And now the things get tricky...
There was an attempt by Aratus to clean the environment. It was performed in a form of an experiment. Some of the Aratus were separated and placed in a cleaned water.
What they found out was that the separated ones lost their connection to the Song. They didn't need to hide from pain.
Aratus exterminated the saparated ones and, to ensure that the link will be preserved, they filled their ships with polluted water. [Yep, that's pretty messed up :|]

When humans came back to Earth, Aratus recognized that it was them, who polluted the planed a long time ago, so they killed them. Then Aratus started a war against humanity, in a name of justice - claiming that humans know only to kill, so they have to be exterminated.

The third race. Little is known about them.
They've made the Psychic Disruptors ("purple lights"), purple saucers and the Ark.
They've also created psychic entities, such as the main character (Brainsucker/Silent One), the Singer and Ikiryo, to collect memories - to get to know other races without being contacted/detected/etc.

It seems that this project failed. It also seems that 'the Watchers' are no more.

Aratus know about Watchers and the Ark. Perhaps the Singer shared his knowledge about them. Aratus see them as a threat.

A huge ship, made by the 'Watchers'. It was found by humans somwhere around the Nupitt. It isn't completely clear how did it get there. It seems that Ikiryo (by Aratus called "the flase singer" or "false prophet") stole it from the 'Watchers', perhaps killing them beforehand (it seems he has memories of the Watchers). The ship contains other psychic entities (perhaps all of them) in a state of stasis/sleep. Ikiryo tried to hide them from... pretty much everyone.

When humans found the Ark, they surrounded it with a whole (but not entire!) fleet and sent a recovery team. Then the Aratus' fleet came. The recovery team had to retreat, but they managed to recover some device - perhaps some container, where the main character slept (the only thing that's sure, is that they took him from there and he woke up in the process). Ikiryo also woke up and activated ship's weapons. It destroyed almost whole two fleets.

And... here we are. Two decimated fleets. Human colony under attack by Aratus. A ship with a psychic entity on a borad.

Humans got aware about the psychic entity. It isn't clear if what they called the "brainsucker" (in their memories) was always the main character or was it also Ikiryo.
What is clear is that they tried to convince the main character to help them. They saw him as a mean to take control over the Ark and use it against Aratus.

Aratus on the other hand wanted to destroy anything that humans took from the Hidden Eye - that's why they attacked the ship in the beginning of the game. Only later they discovered it was "another false singer".

Both sides are afraid of him, but among the humans there are some, who know 'the plan'. Some of them among the Command - that's why humans don't retreat and are getting deeper into Aratus controlled space. Pilots follow the orders, but are unaware that their main role is to provide 'hosts' for "brainsucker" to help him get to the Ark.

Aratus... just want to kill humans. they chase them, wherever they go.

Ikiryo - he wanted to be left alone, together with others of his kind. He wanted them to remain pure - as he found out, the memories shape the one collecting them. He got addicted to his power: to control, to dominate others' minds. To "collect lives". He sees himself as a god now.

Singer - according to Ikiryo, he just wanted a safe "host". It is unknown how he got to Earth, but for sure he couldn't find anyone safe there. He decided to spread himself among all of he Aratus. He lost his individuality and became the Song.
Perhaps his plan was to help Aratus. To make whole race safe. In the end he acted selfishly (when he decided not to purify the waters) and his pursuit of security turned into hatered towards humans.

Brainsucker/Silent One - player's character; he just wants to return home (the Ark / Hidden Eye) - it's a subconscious craving that he recognized as his own memory.
During his journey the memories of his "hosts" shapes him. What he becomes - human or aratus - is what determines the ending.