Wasn't that explained in a previous game? I thought the red dragons aligned with the empire all retreated to some sanctuary somewhere after they stopped feeling like playing a hands-on role in the defense of the empire. And then the ones in Morrowind got starved out by cliffracers
However, we absolutely need to figure out what the hell is going on with the dragon lore in Skyrim, especially Alduin. My guess: the dragon war took place in the mythic era, Alduin always mantles Auri-El (you can't bring a dead god to life, but you can bring life to a dead god), and the Alduin described in the Seven Fights is a post-mantle Alduin from a previous kalpa. When the Nords talk about having defeated the dragons in the past, they mean it in the same way I might say we "defeated syphilis." Sure, its still around, but its not a huge threat. They also try to overlook Tiber's use of dragons, because that's almost like Jesus consorting with the devil.