Don't really understand how the Emperor lost?

Please, read the book. To put it succintly, though, first there is the sandtrout (I can't remember if they osmotically split off from each other to make more or not). Their job is to seal off water sources because water is poisonous to the worms; it will kill them. When enough of them seal off water sources they have a chemical reaction take place, and a pre-spice mass forms, building up gases and pressure. The pre-spice mass then blows into the air with a big explosion, exchanging what is on the surface of the sand with the sandtrout down below, who become the 'little makers' or the leathery plant/animal hybrids. When the spice (which is produced in the chemical reaction) blows it kills a great number of the sandtrout, by the way. The little makers burrow down into the lowest levels of the planet and eventually become worms, having absorbed the smallest amount of water possible that will make the reaction happen and not kill the little maker. However, if you plant water on the ground over the pre-spice mass, when it blows and sucks the surface down, the water will spread out over the whole planet among the little makers and kill them, since too much water is poison, remember? It's a chain reaction that grows and grows. When it stops, there will still be worms left, but no more little makers or sandtrout, and then the spice production would stop.