As I promised, my lecture on the Great Goblin Battle of 613. If you have any questions, please feel free to leave a post on the board or I am always available during office hours and by email.
That being said....
Many of the mythological beings once of your world abandoned The Terrane (what they came to call your realm) after the Great Goblin Battle.
Man tried very hard to dominate the races from beings as small as fairies and sprites all the way up to the mighty dragon. No one was safe. Man became brazen drunk with the power he claimed over the smaller beings. Dragons, once a friend to the human race, ruling the skies and protecting man from giants and other intruders, suddenly found the tables turned and found themselves being hunted to the point of near extinction.
Man was becoming a race arrogant with power. They battled for land, for treasure, for sport. As they plundered through smaller, weaker races, Mans ego began to grow to the point he considered his race superior to the other races that magic no longer mattered only will and power and might. It was a bloody and cursed time and the mythical nations could no longer survive in The Terrane world. Man became maniacally addicted to slaughtering all nations including their own species.
The Goblins and the Elves, and I daresay a few Trolls, stayed behind to fight the good fight. The Elves mastered their craft and Elvin made battle gear was virtually impenetrable, a truly great defense, but the Elves longed for the magic which was fading quickly in The Terrane. Longing for the old ways, they too left for the Netherscape to start anew. Trolls were a worthy ally, bloodthirsty battle was not too much for them to handle. But Mans numbers kept rising, when one fell in the course of battle there were always more who came to replace them. The battles for keeping the homeland of The Terrane took its toll. Goblins embraced a new attitude. Long gone were the days of mischievous fun, in its stead we were left angry, battle trod and displaced, changed forevermore. Soon the sheer numbers of the unending battle-minded human race combined with the disappearance of magic and all the old ways drove us to be vanquished into a new homeland., the Netherscape. The hope of fantasy and the promise of peace were gone from your world, as were we.
And so it was, the worlds split into two separate realms one filled with fantasy and magic the other where fantasy and magic were but a distant memory kept alive only by fading legends. The folk of the fairy realm dwindled into obscurity, swallowed whole by the growing arrogant nothingness that overtook the realm of the Terrane. Mythical creatures thrived in unity in the emerging Netherscape a realm whose very foundation was forged in the magic of a diverse nation.