Why was the ring necessary for Sauron to have to control Middle Earth?

Sauron seems to have quite a bit of power while he does not have the ring. What does the one ring in his possession allow him to do that he cannot without it?

He still controls thousands of orcs, the ringwraiths and other creatures to do his dirty work while not having the one ring. From what I understand, Sauron needs the one ring back in order to be able to gain control over middle earth and it's people. What is the reason for this? He was still able to be destroyed when he had the ring, simply by having it cut from his hand.

Is it the fact that his powers greatly increase while having the ring, and if so, what are those powers that increase?