I know it started with an assassination, but I know there are events leading up to that moment that really made the region unstable. Could anyone shed some light on what was happening in Europe at that time?
The problem in answering your question "in a nutshell" is that it's actually really two questions (if not more, but i'll stick with two to point out the complexity of the question at a basic level.)
The first question is: "Why did this particular conflict break out?"
That is arguably the part where the assassination of the Archduke Franz Ferdinand comes in to play, and deals with the diplomatic pre-conditions like the alliance systems which were eventually triggered by the reaction to the assassination of the Archduke.
That's certainly an interesting question in and of itself, but in a way it's what has given us a sort of parodic understanding of the conflict exemplified by analysis like WWI as a Bar Fight. Which is funny and actually not entirely inaccurate blow-by-blow but (aside I think from misunderstanding even the diplomatic complexity) it misses the second and arguably more interesting question which is:
"Why did the European conflict that broke out in 1914 become 'WWI'?" Which is to say, the largest conflict and the greatest mass slaughter in human history up to that point with trench warfare and gas and all the rest. I say this question is arguably more interesting because there were a half dozen crises that might have produced a European general war but didn't, and conceivably the crisis that led to WWI might have been averted, and while there are some specific circumstances about why that was, the fact of a mass "European general war" in the early 20th century is what makes WWI the Great War so to speak.
So while those are related questions, I think they have to be dealt with or understood separately or else you'll wonder why a question about assassination has me talking about industrial production. I'll try and keep it short, to be "in a nutshell" but I, personally, just find this to be a really fascinating question that rewards further study. I think the best way to do that might be to give sort of bullet point answers that point to topics to explore in terms of "what really started WWI."
The Alliance System: Europe at the time of the outbreak of WWI was defined by the emergence of two alliance blocs. After the Napoleonic wars in the 19th century, the so-called "Concert of Europe" maintained a system of balance-of-power alliances that, in effect, prevented a general European war from breaking out between 1815 and 1914. By the time war broke out this had devolved into a more purely bipolar system (largely as a result of the emergence of a unified Germany): Triple Alliance (Germany, Austria and initially Italy, but then the Ottoman Empire) and the Triple Entente (Russia, France and Great Britain.) The emergence of these two blocs is complicated, I think particularly on the Entente side where a more purely anti-German Franco-Russian alliance becomes a Triple Entente with Britain, but this was the necessary precondition, diplomatically.
Austria and the Balkans: Austria-Hungary was a weird empire and the Balkans are a weird place. The intersection of those two weirdnesses was bound to create conflict in some form, but notably from a diplomatic perspective you had the competing interests of Russian Greater Slavdom intersecting the territorial interests of Austria-Hungary in places like Serbia. By 1914, this had already produced, notably, the First and Second Balkan Wars.
Germany: Over the past 50 years, the question of responsibility for WWI has been dominated in large part by debate over the so-called "Fischer Thesis." This is so-named for Fritz Fischer's 1961 book, translated into English as Germany's Aims in the First World War. Fischer posits that Germany's backing of Austria against Serbia following the assassination of the Archduke was part of a deliberate effort to provoke a sort of preventative war of domination. Preventative because Germany knew it was caught in a sort of Thucydidean Trap where war in 1914 would be risky, but it was better to have one in 1914 than 1924 or 1934 when its enemies would dominate it completely. Of domination because as Fischer lays out, the solution to that was basically a set of war aims that required total European domination. The result is what has been called the "Blank Check" to Austria, that Germany would back Austria in the Balkans no matter what. More recent histories have focused on how France and Russia in particular reached similar conclusions but from the opposite perspective; that Germany had to be stopped now and so better to have a war now than later. This prompted the so-called "Balkan Inception Scenario" in which France and Russia came to an understanding that even though the Balkans were of relatively marginal importance that they were willing to go into all-out war with Austria and Germany in the Balkans that would precipitate war. They didn't know that it would specifically be the assassination of the Archduke (though Russia's role in the assassination is debated) but they knew that such a scenario was likely enough that discussions between Russia and France included such a scenario as leading to a general European conflict from which neither would back down despite its origins on the European periphery.
Belgium and the Schlieffen Plan: In a sense by this point (August 1914) war had already broken out, but this is important to answer the specific question of how Britain ended up involved in WWI. Britain had made care never to enter into actual military alliances on the continent. Its relationship with France and Russia was merely an "entente cordiale", in contrast with the much more explicit Franco-Russian alliance. Britain's entry into the war was predicated on two things. One was that the British foreign secretary Sir Edward Grey, largely without notifying parliament, had come to a series of agreements that put Britain in a status of de-facto alliance with France. Notably, in 1912 Britain and France had agreed that the French would withdraw from the North Sea more or less committing Britain to France's defense in the event of war with Germany, otherwise the north coast of France would be rendered defenseless.
Of more conclusive importance was the German invasion of Belgium. While Britain had no formal alliances, it had, upon Belgium's creation in [edit] 1930 1830, guaranteed its neutrality and independence. The German war plan, the Schlieffen Plan, called for the violation of Belgian neutrality in order to bypass the French defense and deliver a knockout blow to France before Russia could fully mobilize. When Belgian neutrality was violated, Britain's entry into the war was rendered a foregone conclusion.
That's sort of the nutshell background for the diplomatic side and I'm coming up on the character limit so I'll answer the second half in a part II. I promise I'm trying to keep this punchy, but like I said, it's complicated!