Sauron occupies Dol GuldurSauron occupies Dol Guldur - After the defeat of Sauron at the end of the Second Age, he endured, but became a ethereal spirit intent on regaining his full form.  As long as the Ring survived, he survived.  But he could not return immediately to Mordor as his tower of Barad-dûr had been razed.  So while his minions rebuilt it, he took up residence on the "Hill of Sorcery".


"Then the name of the forest was changed and Mirkwood it was called, for the nightshade lay deep there, and few dared to pass through, save only in the north where Thranduil's people still held the evil at bay.  Whence it came, few could tell, and it was long ere even the Wise could discover it.  It was the shadow of Sauron and the sign of his return.  For coming out of the wastes of the East he took up his abode in the south of the forest, and slowly he grew and took shape there again; in a dark hill he made his dwelling and wrought there his sorcery, and all folk feared the Sorcerer of Dol Guldur..." ~The Silmarillion (Of the Rings of Power and the Third Age)