Part 3: History
As established, Stonekeep is an alternate history of Earth. Over a thousand years ago, mankind and the other mortal or long-living races existed in a golden age. Man lived all over the world, and two of its mightiest nations were Atlantis and Ys. These nations did not suffer the fate they supposedly did in our history, thanks to the use of magic (Lady Iaenni accompanies her story with images of Atlantis and Ys, which are shown to actually be cities floating above the oceans). Atlantis was ruled by its Lord Sorcerers, while Ys was ruled by the Dark Warlocks. In this time, magic was used for just about anything, from great tasks to small chores. This made it all the more dramatic when human seers announced that the source of magic, mana, was finite, and beginning to run out. Atlantis and Ys, long time rivals, each argued that the other should start conserving mana while both carelessly kept using the stuff. Eventually, these two juggernauts went to magical war over their disagreement. As Rathe describes it in Thera Awakening:
Long centuries ago, magick had been the driving force behind human society and human warfare. Two rival cabals, the Lord Sorcerers of Atlantis and the Dark Warlocks of Ys, had warred with spells as well as steel. The final struggle had been an exchange of ever-more-deadly sorceries. The final spell had been cast by the Dark Warlocks. It went out of control, and the result was the Devastation: the end of the world.
As Lady Iaenni tells it, a dark stranger showed up on the doorstep of the Warlocks of Ys one day to offer them the spell that would finish of their enemies forever. The identity of this stranger is never confirmed, Khull-Khuum is implied, though Wahooka would be a likely candidate as well, perhaps even working with Khull-Khuum. In any case, the Warlocks didnt ask too many questions and spent years performing rituals to complete this spell. It had the intended effect, but wiped out Ys along with Atlantis, and most of the world: the Devastation.
"Continents burned, oceans boiled, and both warring nations sank beneath the waves. Even the gods had not escaped unscathed. Neither the Dark Warlocks nor the Lord Sorcerers survived nor had most of the rest of humanity. The scattered survivors had taken centuries to rebuild human civilization, even with the help of the subterranean Dwarves. Other races were hit even harder if the greenskinned throgs and their smaller cousins, the shargas, had been civilized before the Devastation, they were no longer. And none of the legendary Elves and few of the magick-using Faeries had been seen since the skies burned.
If it wasnt Khull-Khuum who delivered the spell to Ys, he was certainly prepared for the results. For the record, the combined might of Atlantis and Ys was such that even the gods didnt stand a chance against them. And so even they were struck, hurt, disoriented or harmed by the Devastation. When his brothers and sisters were at their weakest, Khull-Khuum in turn attacked them with the spell that would trap them in orbs and allow him to capture them.
The gods were not the only ones targeted by Khull-Khuum he drove the destructive force of the Devastation specifically to wipe out the cities of the Elves on Earth, most likely because they were some of his most dangerous enemies. The faeries retreated into their realm, narrowly saved from destruction by their queen, though Khull-Khuum still managed to drag their realm beneath the earth as he would later do to Stonekeep.
As the chaos cleared up, the mortal races began resettling themselves, though they would never quite achieve the level of advancement they had before the Devastation. The great magics of those days were lost as well, and the only magic still in existence closely guarded by their practitioners was the lesser rune magic. The rampant energies of the Devastation spawned a multitude of hideous mutants that plagued people from dark places, like forests and caves.
Humanity mostly settled in keeps, cities of stone. Some of these, Stonekeep included, had communities of dwarves living in tunnels underneath them, in a symbiotic relationship. There were also tribes of savage humans who lived in more exposed villages, as read in Thera Awakening.