The Great War:
In the Battle of the Starchild, hordes of fiends and celestials clashed on the battlefield of Metamor Valley, fanatically bent on exterminating each other with little concern for collateral damage. When the Starchild arrived on the scene, she quickly realized two things: (1.) No fiend or celestial could be allowed to remain in the Hells or Heavens, for the connection to those sources of divine energy would quickly make them powerful enough to claim control of the Pantheon for themselves. (2.) Dragging the fiends and celestials onto Earth would be nothing less than disastrous. The devas and balrogs, the warriors of their respective sides, would quickly turn the whole Earth into a battlefield for the War. Perhaps even worse, the incubi and succubae would spread over the whole world -- and considering how prolific they were, they could easily come to dominate world affairs in only a few generations.
Faced with these two unpleasant realities, Merai looked for a third option -- and found it, in the form of the Dreamlands. Here was a realm of theoretically unlimited space, with limited access to the mortal plane and a geography chaotic enough to keep the minor members of the Pantheon from easily finding their way out. True, there were many creatures that were native to the Dreamlands, but such beings were already used to chaos and would probably be able to handle the influx of new beings more easily than Earth itself. It was not a pleasant choice, nor a perfect one, but the Starchild felt she had no other real options. Opening wide a portal to that realm, she funneled the inhabitants of Heavens and Hells alike into the Dreamlands and shut the door behind them.
As Merai had hoped, the displaced demigods quickly busied themselves with attacking each other. The devas and balrogs fought toe to toe, the eladrins hunted down wraiths, and the imps and gremlins engaged in a half-hearted conflict with glimmers and sprites. Meanwhile, the incubi and succubae sneaked off unnoticed into the depths of the Dreamlands, along with the other less combatant members of the Pantheon on both sides.
The battle raged for weeks before it finally simmered down, as both sides met with severe casualties and withdrew to lick their wounds. It soon became clear to both the celestials and the fiends that neither one would achieve victory unless they could acquire some sort of advantage. They all tried for a while to find portals leading to the Material Plane, but it eventually became apparent that this was not as easy as it seemed. Once they realized that the Dreamlands were populated, though -- a revelation pointed out to them by the Dream Walkers, Nocturna's largely neutral servants -- it didn't take them long to figure out what to do.
The celestials wandered until they came in contact with the Fae, the magical nature-aligned beings who were (and are) so common in the Dreamlands. They soon forged an alliance with these good-hearted creatures, and began planning to rid the Dreamlands of the daedra. Likewise, the balrogs and other militant fiends found their way into the darkest, most nightmarish corners of the Dreamlands, and there allied themselves with horrible and nameless things that sought the extermination of all that was good and beautiful. Meanwhile, the more selfish creatures from both sides disappeared into the woodwork, immersing themselves in the bustling cities and surreal countryside of the Dreamlands.
Over twelve hundred years have passed since those opening moves, and the War still has not ended. In many parts of the Dreamlands, in fact, the War defines almost every aspect of life. Celestials and fiends alike have built huge fortresses and gathered massive armies within the shifting realms of the plane, and their rulers control the lives of millions of sentient beings. The militant castes of demigods have slowly rebuilt their numbers over the centuries, though they suffer from a slow lifecycle and high attrition, and neither faction has given up hope of one day eradicating the other. The eladrins and devas have occasionally had bitter disputes about how to proceed in fighting the War, but they have managed to hold their alliance together consistently enough to keep the daedra from gaining an advantage.
The only group that has really benefited from the War are the incubi and succubae, who receive little attention from the militant celestials because they rarely kill their victims. By staying undercover (no pun intended), the children of Suspira have been able to insinuate themselves throughout the humanoid races of the Dreamlands. They can't breed quite as successfully with these races as they can with humans, but they have been successful enough: there are more incubi and succubae in the Dreamlands now than all the other fiends and celestials combined. They would be truly dangerous in the War, if they weren't concerned only with feeding and reproducing themselves -- which is probably why the celestials haven't done anything to provoke them to anger.
All sides are still seeking portals to the Mortal Realm, but such passages rarely stay open long enough to be exploited on a large scale. Individual fiends and celestials often travel to the Prima Materia, investigating the situation on Earth. Sometimes these scouts return to report on what they've found, and sometimes they decide to stay on Earth, but neither faction in the War has seriously considered retreating to Earth, even if such a thing eventually became possible. The issue has become a matter of principle, now, and neither side would willingly relinquish control of the Dreamlands to the other. The incubi and succubae, of course, take any opportunity they can get to escape back to Earth -- both because they usually prefer humans, and because the available supply of humanoid partners in the Dreamlands is highly diminished, relative to the number of incubi and succubae who are making use of them. A humanoid can only be drained of life energy so often before the process begins to have a detrimental effect, and the incubi and succubae are discovering something very much like a food shortage in the Dreamlands....
Given all of the madness going on out there, control of the Dreamlands is an important issue. Nocturna, assisted by Kyia and Merai, struggles to maintain her jurisdiction over access to the plane, in the face of challenges from groups that look on the Dreamlands' malleable nature as a potential source of revenue. All three women know that if someone figures out a way to travel reliably between Earth and the Dreamlands, without the help of Nocturna or Kyia, some of the gods or daedra lords (or those who wield their power) might decide to hook up with their long-exiled subordinates and force an end to the War. Just what could happen next, with one side victorious and a large standing army of fiends or celestials ready to be used, is an idea that none of these women want to contemplate. Nocturna does her best to keep the dreams of mortals separate from those parts of the Dreamlands that have been taken over by the War, but every so often one of its skirmishes wanders a little too close to the mind of some sleeping soul -- who then awakes with memories of great and terrible battles between darkness and light, trapped in a war that never ends.