Well to start off' when the war broke out Russia was in no way prepared for a major conflict. They had been thrashed by the Japanese in 1904-1905 in the Russo-Japanese war, which left the economy in shambles, and Russia dangerously unstable. Even though Russia had the largest army in the world at the time, they lacked the industrial capacity to arm and equip their soldiers, with many common soldiers not even having rifles at the outbreak of the war, not to mention shortages of machine guns and artillery. The Russians allies attempted to alleviate these shortages through loans and arms shipments, but with the Dardanelles being blocked off by the Ottoman Empire and the German High Seas Fleet threatening the Baltic, these imports of materiel ceased. The loss of access to the Dardanelles was especially critical. Prior to the war 9/10 of Russia's exports went through the Dardanelles into the Mediterranean. In addition to the strains put on the Russian economy, catastrophic military defeats like the Battles of Tannenberg and the Masurian Lakes had seen losses of hundreds of thousands of men. Although manpower was basically the one resource the Russians had in droves, it made no difference because the Russian army lost massive amounts of equipment that simply could not be replaced. Despite the Russians enjoying considerable success against the Austrians, it could not last when Germany came to bail out their weaker ally. By the end of 1915, the Russians had been forced out of Austrian territory, and the Central powers had occupied all of Russian Poland, and what is today Lithuania and Latvia. What really brought the Russians crashing was revolution. In 1917, the Germans transported Vladimir Lenin from Switzerland through Germany and into Russia, with the understanding that he would incite revolution and topple the Tsarist Empire. And thats exactly what he did. The first revolution in February toppled the Tsar and installed a provisional Government headed by Georgy Lvov, who was himself replaced by Alexander Kerensky. However the Provisional government was still intent on fulfilling Russia's obligation to her allies. Eventually this led to the divide between the anti-war Bolsheviks led by Lenin and the pro-war Mensheviks led by Kerensky. It wasn't until October 1917 that the Bolsheviks overthrew the provisional government with the intent of making peace at any costs.

And the costs were staggering. The Treaty of Brest-Litovsk was signed on March 3, 1918, losing all of Russian Poland, Finland, Courland, the Baltic States, what is now Ukraine, Belarus, and Georgia, Bessarabia, and the returning Kars, Ardahan, and Batum to the Ottomans. This amounted to the loss of nearly 1 million square miles of territory, 55 million of its population, the majority of Russia's Iron and coal reserves and most of its industrial base as well. Lenin bitterly called the settlement “that abyss of defeat, dismemberment, enslavement and humiliation.” To give some context as to how much land was lost here! is a map showing the full territorial changes.

The consequences of this defeat saw Russia plunge into civil war until 1923, in addition to widespread famine, a shattered economy, and a country that was in ruins and would not stabilize until the mid to late 20s with the inception of Soviet Russia.

If you have more questions please ask.

EDIT: Lenin was smuggled into Russia after the February Revolution. The Provisional Government had continued the war against the Central powers and the Germans hoped that Lenin would install a new government that would make peace. Sources: In Wars Dark Shadow and Passage Through Armageddon by W. Bruce Lincoln.