The early 20th Century was full of ideas and actions dealing with imperialism. The ideas and the people of Europe were now spread to all corners of the globe. Since the ideas of imperialism include reaping raw materials from foreign nations with the idea of making money, a lot of people around the world, especially on the far-eastern side of Asia, were very upset by this. Japan was one of these countries. The people of Japan decided that since all these western powers can come through and take lands for them to develop power, we could too. At the same time, Russia was trying to increase the spread of their landmass by going into modern-day North Korea and Manchuria. Russia needed these lands to have grasp of a non-frozen water port in the Pacific Ocean (Sound familiar? Hint-Hint Crimea).
The Russians and the Japanese tried to come to an agreement on which lands their respective countries would leave alone and which lands they would have involvement in. The Japanese offered the Russians full influence in Manchuria in exchange, the Russians would pull out of Korea. These agreements ultimately failed and Japan made a pre-eminent, naval attack against the Russians in February of 1904.
The Russian navy had secured a port named Port Arthur on the coast of Manchuria. The Russians were leasing this port from the Chinese government in order to have a year round warm water port. The Japanese saw the strategic influence of the port and decided to attack. This initial attack damaged two of the Russian Navy’s best battle ships, the Tsesarevich and Retvizan, and cost them their best naval strategist, Vice Admiral Stepan Makarov. The Russian Navy was in shambles and their ground forces were pulverized at the Battle of Yalu River in May of 1904. Almost all the Russian forces at this point were driven back to Port Arthur.
The year of 1905 was much worse for the Russians. At the Battle of Mukden, the Russians lost 90,000 men and lost massive amounts of support for the war. This worsened with the loss of 8 battleships and five thousand men at the Naval Battle of Tsushima. The soldiers became even more demotivated with the Revolution of 1905 going on in the home front.
The war was essentially lost for Russia. Without much support and incompletion of the Trans-Siberian Railroad, the war was impossible to win. Tsar Nicholas II, as usual, was a fairly incompetent leader and made many wrong decisions when trying to conduct the war. On September 5th 1905, mediated by President Teddy Roosevelt, the Russians and Japanese met in Portsmouth, New Hampshire to discuss a peace treaty. The Treaty of Portsmouth was signed and Russia completely pulled out of Port Arthur and the Korean Peninsula
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http://en.wikipedia.org/wiki/Russo-Japanese_War#Battle_of_Port_Arthur
http://www.russojapanesewar.com/sedgwick-3.html