[Galadriel55]

Sauron put a lot of his power into the Ring. He still has great power besides - but the Ring is a significant "investment". With this additional power he would be able to dominate even the Three Elven Rings and reach from within into the Elven strongholds.

When the Ring was lost but not destroyed, the power within it was like a reserve that you can't use. But it was still there, and you could not defeat Sauron without destroying the Ring - there was too much of him in it. But this is the more "neutral" position.

If Sauron's enemies (ie Elves, Gandalf, Gondorians, etc) found the Ring and discovered its potential, he feared that they would use it to overthrow him. The Ring would betray the lesser beings to their end, like it did Isildur, but if someone great weilded it there would have been a possibility that they would defeat Sauron and become the new Dark Lord - since the Ring corrupts. To make an analogy: imagine Gandalf finds a wallet full of Sauron's credit cards.

However, what Sauron hadn't anticipated or feared (by Gandalf's words) is that his enemies would seek to destroy the Ring - not destroy him and/or replace him, but destroy his reserve and leave him "bankrupt" of power forever.


Edit: xed with blantyr who makes good points