After Kasparov retired and when it was obvious that the Prague Agreement won't materialise, FIDE tried to reunify the title some other way. Since the KO tournaments were out of favour, they tried to set up an 8 player double round robin tournament. Following players were originally invited to the tournament:
and 4 top players in the FIDE rating list (average rating of July 2004 and January 2005 rating lists). Those were:
Kramnik refused to participate, insisting that the Prague Agreement guarantees him a match with the FIDE World Champion. He was only prepared to play the winner (read here). Kasparov, who retired earlier, also declined his invitation. In my opinion Kasparov would only be willing to come out of retirement (he retired only few months ago) if Kramnik would participate too, meaning that the winner would be undisputed World Champion. Since Kramnik declined to participate, Kasparov saw no point to become only FIDE World Champion and then to wait for a possible reunification match with Kramnik, which may or may not happen.
As a substitution for Kramnik and Kasparov, next two from the rating list were called in:
* - if a player was inactive in one of the rating lists (July 2004 or January 2005), only the active rating was taken, instead of the average. Players that were inactive on both lists were ineligible.
This made Judit Polgar the first (and so far only) woman in history to play for the World Championship.
The tournament idea with 8 best players was well received by the public and it was the first FIDE World Championship in a long time that was credible in the eyes of the public. The only thing that left some bad taste in the mouth was Kramnik's non-participation. Also returning back to slower "classical" time controls was met with approval among the players and public alike.
Topalov won convincingly. He started with a 6.5/7, one of the most impressive performances in history, before coasting to victory by drawing all his remaining games.
Impact on the future
World Championship tournament was a success and FIDE decided to repeat the format 2 years later. Top four in San Luis were automatically seeded into the 2007 World Championship.
Although people today tend to put Topalov in the same group of other FIDE World Champions (thus not "real" World Champions), he was at that time considered as a legitimate World Champion by great majority of public. Topalov was clearly the best player in that period and was dominating in top tournaments in 2005 and 2006. There was only small minority who considered Kramnik, who was playing unconvincingly and was continuosly slidding down the rating list, as the "true" World Champion. By that time, his only argument was that a title can only be won in a match (it is pretty weak to me, if the competition format instead of performance is the only argument one has - besides it's not like Kramnik didn't have a chance to prove that he is the best. He simply refused to participate).
Match between Topalov and Kramnik in the following year (with it's controversies), completely changed people's perception of Topalov and Kramnik as a World Champion in retrospective. Kramnik came out as the hero, and Topalov's public image still suffers from the events that took place in Elista.