[Pitchwife]

As our dear sally would phrase it: What he said (Legate, I mean). But to elaborate a little, I think the fading of the Elves before the coming dominion of Men started long before the Third Age and the War of the Ring. Already at the turn from the First to the Second Age, the Eldarin population of Middle-earth had diminished considerably due to the War of the Jewels and the subsequent exodus to Tol Eressea; during the Second Age, we see them more and more confined to a couple of isolated realms (Lindon, Eregion, Lórien, Greenwood the Great - this tendency continues into the Third Age, of course), while Men multiplied much faster and spread over the vast areas inbetween.
In this context, the forging of the Rings of Power could be seen as a last attempt by the Elves to hold their own - to restore or preserve the world as they had known and loved it, if only in a few protected places. When that attempt backfired bigtime, what else was left to them but resignation? Realizing that their desire to resist the change had rendered them vulnerable to manipulation by the Enemy probably didn't help, either.