sonic uses the master emerald to travel back in time to prevent robotnik from rising and stop the war on Mobius by eggman's robotic army. unfortunately his attempt, while appearing successful, actually inspires robotnik's most dangerous and powerful design to date, which he spends years perfecting: Metal Sonic. 

When sonic returns to 'his time', Mobius isn't at [i]war[/i] with Robotnik; it's been [i]conquered[/i] by him through Metal Sonic's power, and Sonic's friends have been enslaved as forcibly-converted robots. 

Even worse, in the new timeline, the Master Emerald doesn't exist - Metal Sonic shattered it once Robotnik's rule had been established, as he recognised it was the only legitimate threat to their reign. Knuckles, the last Echidna, is less than pleased about this, and blames Sonic (as a Guardian of the Master Emerald, he is immune to having his memory re-written, because of plot devices).

The Chaos Emeralds themselves have been scattered, some picked up by thieves and bounty-hunters - outlaws, un-roboticised but not against Robotnik's rule, just making the best of a bad situation - others guarded by lieutenants of Robotnik's army. They need to be collected to undo what Sonic's foolish meddling in the timestream has done, but that won't be easy, especially with Robotnik and Metal Sonic hot on his heels...