Let's sketch a quick potential history, shall we? Assuming standard fantasy races...
The Faery Kingdom - Long before the "civilised" races arrived, these lands were ruled by the Faery Queen and her ilk. Little is known of those days, save that the creatures were great in power, magic and culture, far surpassing the tawdry beings of today. Something called the Dwindling happened (nobody is quite sure what that is) and for one reason or another the Faery Queen's power and grasp diminished. These lands passed out of the Faery Kingdom's demesne and became wilderness. Here and these, usually buried under earth and tree or located beneath elven sites, the ruins of the graceful cities can be found. Scattered faery creatures are rumoured to remain, and are greatly revered and feared alike.
The Elven Lords - Some time after the Dwindling, the elves moved in from foreign lands. They first inhabited the ruins of the Fey cities, and then in time built their own. For apparently religious or cultural reasons, elves hate or fear writing, and very few examples of elven script survive from these times. Even in the modern day, orthodox elves stay away from the written word. Everything we know about Old Elven history is from oral storytelling or art. Despite their aversion to script, the Old Elves were deeply enamoured of artwork and their paintings and sculptures are found in every surviving piece of elven architecture, even down to the humblest stone wall.
Legend holds that the Old Elves lived under a sort of elective monarchy, with autonomous Lords beneath a High Lord who governed a reach somewhat further than Stormborough extends today. Artwork and artefacts of the time corroborate this, and are found everywhere below the mountains. Unfortunately, most of their work was with wood, leather and other degradable materials, even their architecture, so the buildings that survive are mostly government buildings or similar important structures. Although these is evidence of occasional scouring of swamps for bog-iron, it seems there was little mining amongst Old Elves, and few metal items are found either.
The Elven Lords ruled for the better part of a thousand years, waxing and waning in power, and then waxing and waning again. By the time the Iron Prince arrived, their internal squabbles and war with the dwarves had weakened their people to the point of collapse.
The Dwarf King - Nobody is sure where the dwarves came from, and they will not tell, but legend has it that they somehow were born within the Windwept mountains themselves. They certainly do not appear to have migrated there from anywhere else, although dwarves have certainly migrated away to many other lands. In direct contrast to the elves, dwarven artwork is very simplistic and utilitarian, while their written word is complex, extensive and deeply nuanced. Words and storytelling seem to be central to their culture, and poets and skalds have great importance.
Sometime around the middle of the elven millenium in these lands, the dwarves appeared in the mountains, building homes and digging mines. Dwarven crafts start to appear around this time, and the few abandoned dwarven settlements that have ever been discovered indicate great focus on craft, especially with metal, stone and gemstones. (Note that it seems to be dwarven policy to completely destroy a settlement when abandoning it; hallways are collapsed, tools broken and furniture destroyed. All expeditions, however, indicate that any writing seems to have been cleanly cut off the walls and taken away with the departing walls. Written words are only found when a mine or settlement has been abandoned in a great hurry, perhaps due to explosions of coaldamp or similar.)
The dwarves appear to have been ruled by an absolute monarchy, organised in strict heirarchy from their King down to the individual mine commanders and expedition leaders. How well this structure has survived into the present day is unknown, but it appears to still be the case.
For reasons lost to time (no doubt the dwarves have it written down, but they have chosen to be secretive about the matter) the Old Elves and dwarves ended up in a cold war that lasted for the better part of five hundred years. Said war heated up several times, but overall it appears to have been a stalemate. Both sides were ruined by the conflict, however, and it is into this that the Iron Prince arrived.
The Iron Prince - The Iron Prince was once an adventurer by the name of Anwin, a homeless human wanderer. He had various adventures throughout the many lands, eventually finding himself in these ones. Legend holds that he found a nest of nymphs and, seeking treasure, slew all but one. The last nymph offered him a wish in exchange for her life.
Anwin wished to be Prince of all he surveyed. The nymph gave him a priceless jewel, the River's Tear; a smooth gem that might be a sapphire, did it not ripple with soft light like the sun on a calm river's surface. She promised that it would be the mark of Princedom to him, and that if he wished to find his principality he should head north. Anwin spared her life, and promised that when he was prince all of her ilk would have his protection in gratitude (and so they do to this day).
To the north, Anwin found the wild lands of the Turmen and their human slaves. He fought the giant men and toppled their king, Vojvod Krum, gaining for himself an army. His army, however, was but a rabble of weakened slaves, weaponless and without spirit. He prayed for guidance, and the gods spoke to him in a dream, telling him to head west to the mountains. He marched his slaves to the Windwept mountains, following the vision. Many died, but those who survived were hardened by the journey.
Anwin reached the Windwept mountains and found himself lost in the winding mountain passes. He began to give up hope, but looked at the mountains through the River's Tear and was able to see the hidden entrance to the dwarven kingdom. He made the journey, solved the seven riddles of the dwarf doors and gained entrance, demanding to see the Dwarf King.
Anwin never spoke of his meeting with the Dwarf King, but it is known that a pact was reached; he would have steel weapons and armour for his army, and in return he would drive out the elves from the lowlands. He build a castle on the slopes of the mountains and named it Sturmburh (now Stormborough), and from that castle he plotted his campaign.
One by one, the elven lords fell, until all that the Iron Prince surveyed was indeed his. Yet the River's Tear demanded a price of its own, and the Iron Prince fell sick with a disease that filled his lungs with water. He mandated that of his sons, only the strongest would be worthy to take his crown, only the one left standing. When indeed the Iron Prince drowned on dry land, his seven sons warred and the Diamond Prince took the crown in his stead, standing atop the corpses of his six brothers.
It has been four hundred years since the Iron Prince, and a good dozen Princes. Elves remain both mysterious and despised, and while trade with the dwarven kingdom has historically flourished, they are mistrusted for their intense secrecy. The Turmen and their ilk are suspect for their past, and believed all brutes and slavers, while the faery creatures are thought but a step below gods.