Ever since the Allies captured the Chin'toka system in 2374 the Dominion had been launching furious counter-attacks in a determined effort to force them back out of Cardassian space. All these attempts were unsuccessful, until the alliance between the Dominion and the Breen in late 2375. 
The Breen forces were reasonably powerful in themselves, but they had never been considered one of the Alpha Quadrants major powers, and were not expected to alter the balance of war markedly in favour of the Dominion. However, the calculations made by the Allies failed to take one important factor into account; the Breen had developed a weapons system which would change the balance of power in the war.
Initially the battle went reasonably well for the Allies - the Breen ships were fast and agile, but proved to be highly vulnerable to heavy weaponry. Several Breen ships were destroyed in the opening volleys before they could even return a shot. However, when they did open fire the Breen weapon created a form of energy dampening field around their targets which rendered them completely without power.
The Defiant was the first vessel hit - it immediately lost propulsion, shields, inertial dampers and weapons. Without the ability to defend itself the ship was a sitting duck, and the Breen used standard torpedoes to inflict massive damage within seconds. Captain Sisko ordered the crew to abandon ship shortly before the Defiant was destroyed.
The rest of the Allied fleet fared little better - ship losses in the battle were almost 100%, although casualties were relatively light as the Dominion did not engage in its usual tactic of destroying the fleets escape pods; a measure apparently intended to allow the survivors to spread fear throughout the rest of the fleet. 
Although this engagement can only be considered to be a disaster, the seeds of yet another turnaround in the Allies fortunes were sown in the Chin'toka system. A single Klingon ship was struck by the Breen energy drainer, yet it not only survived but suffered no significant damage as a result. Investigation by the Allies showed that the only significant difference between this ship and the others was a recent modification to some of its onboard systems. The Klingons rapidly had over 1,500 ships repeat this modification, making them invulnerable to the Breen weapon. Unfortunately, the Federation and Romulan ships were not suitable for such changes. As a result, the Klingons bore the brunt of the war for several weeks.
Ultimately, the Allies were able to mount a daring raid on a Dominion shipyard which allowed them to capture an example of the Breen weapon and work out how to circumvent it on all of their ships.