I'm not sure, but my guess is this: The Dread Lords are gone, the Arnor transcend away taking their technology with them, the rest of the Galaxy is left devastated and all civilizations try to struggle from scratch. The Drengin and other evil civs retreat to their core planets to lick their wounds and regroup, while humans, altarians and the rest of the surviving civs try to repopulate and rebuild the desolation left by the DL and the Korath. That's when a new, yet unnamed menace enters the scene.
Welcome to GalCiv 3. 