The basic facts of the incident appear to be that occupying Army troops, in the area to assist in putting down a recent insurrection, came under attack from a group of local inhabitants, angry at the troops presence on their home soil.
The troops, in a breach of proper discipline, acted severely in reprisal to the assault, which resulted in the deaths of many innocent Teckla and property damage to local residences.
The political ramifications of the event were significant. News of the incident became a rallying cry for a number of revolutionary groups across The Empire, most specifically those based in South Adrilankha. This included Kelly's Movement and other like-minded organizations. (Though as Cawti notes, none of these organizations are actually like-minded enough to cooperate.)
As a consequence of this, a number of groups, including the Jhereg Organization, the House of the Orca, and the Left Hand of the Jhereg, concocted a conspiracy to attempt to benefit their own interests.