The politico-economic system of Westeros is very decentralised feudalism. Local lords wield most of the power, although the king maintains a deal of power as well.
The seven kingdoms that gave rise to the name of the country were conquered and united by Aegon the Conqueror, founder of the Targaryen dynasty. The Targaryens were themselves overthrown by Robert Baratheon, Jaime Lannister and Eddard Stark, leaders of the three most important noble families of Westeros. The marriage of now-King Robert to Jaime's sister Cersei produced the current King, thirteen-year-old Joffrey. However, following the execution on King Joffrey's orders of Eddard Stark, Lord of Winterfell, his son Robb pronounced himself King of the North and seceded his lands. Three other lords, including both of King Robert's brothers, have also declared themselves rulers of their respective parts of the realm or are challenging King Joffrey, and the country is in the midst of a civil war.
(George R.R. Martin, A Game of Thrones, USA, 1996; George R.R. Martin, A Clash of Kings, USA, 1999; George R.R. Martin, A Storm of Swords, USA, 2000)