The Downfall of the Arcane society refers to the period at the end of the Age of Knowledge, when the Arcane Society's entanglement with the Dark Source was largely revealed, and The Shard was created, bringing about the end of the Age of Knowledge, and setting off the Age of War.
By and large, it is the tale of the Companions, a band of adventurers who became key figures in the events. Originally hired by Aergoth to investigate trouble in its mines, turning out to be an Arcane Society portal breached by Elemental Forces. They would venture further on to Last Cove, to consult the priests of the Temple of the Elements on the nature of these invaders.
Finding the temple's crystals activated and displaying strange visions, they were contacted by a Hooded Stranger, dwelling in the Tower of the Sepulchre north of Last Cove. He would send them back to Aergoth, and beyond to the Western Isles, investigating the mysterious arrival of the Daemons.
In the Western Isles, they managed to infiltrate the Daemons stronghold at Krael, discerning its status as an Arcane Society enclave, and uncovering evidence pointing to Tyrius Gadril's administration there. Returning to Aergoth, they would join forces with the Mundane Rebellion, a group of rebels fighting the Arcane Society, and infiltrate Gadril's mysterious Cult of the Unspoken.
Defeating Gadril in the process, they uncovered smuggled Daemons in the cult's temple, and the apparent service of Gadril and many of the Society's Archmages to the Unspoken, an unnamed entity bent on domination of Akrylonor. Wanted for the murder of Gadril, and pursued by the Society's agents, they would flee Aergoth, returning to consult the Stranger at the Tower.
Using the tower's lore, and powerful scrying, they sought out the locations of the Elder Dragons, forgotten god-like entities who might be able to thwart the Unspoken. Able to discern only two locations, they sought out Khazad at Khazad-Mor, but were denied audience by the Earth Dragon, who considered the troubles a human affair. Their effort would not be entirely in vain though, as they came across the Mordrakryn inventor Rojun Kardge, and his prototype vessel, Cloudbreaker.
Using the airship they would travel to New Altalar (the other known location of an Elder Dragon), managing to survive the initial hostile response from its inhabitants, and gain audience with Yvera. Recognizing the danger inherent in both the Daemons and Elemental attacks, and the Unspoken as the Dark Source, the Elder Dragon agreed to aid. She would send the Companions to recover four powerful sources of Elemental Ether, as well as the Runestone of Fyrelight (imbued with the Spirit and Magic ether power of the Fey Plane).
Venturing into a series of portals opened across the continent, the Companions managed to recover the four materials. Lastly they followed the trail of the stolen Runestone, eventually tracing it to cult serving Jy'eleria. Slaying the crystalline dragon, they gained the Runestone, and returned to New Altalar.
While Yvera prepared the ritual to create the Shard, Matthias contacted the Companions again, having discerned that Laycindarius himself was about to cross The Curtain into The Void, and potentially become a deity-level power unto himself. Using Cloudbreaker to reach the Arcane Society's hidden stronghold at Arcan-Tor, the Companions challenged Laycindarius in his sanctum within an Ether Pocket.
They were ultimately slain by the now-godlike Laycindarius, but were successful in delaying him long enough for the Shard to be created, preventing his return and unification with the Dark Source. In the remainder of the Age, the Arcane Society's role in much of the disastrous events was revealed, and the Emperor exiled them to the Eastern Colony. Hiss assassination shortly after would trigger further blame, igniting a war between Aergoth and the Society's remnants, now calling themselves Laycin in honour of their patron.