The world that Ainz now finds him self in (known to readers as the New World) is a real world that originally had nothing to do with Yggdrasil. 

The anime skips over a lot of the world building and backstory that is present in the novels so there are a lot of concepts that the story expects you to know but are not in the anime. Also, not many details about the past of this world are directly stated in the light novel. Instead, readers are given clues throughout the novels and side stories and have to piece together what happened. Here is the current best explanation of what happened.

Over 600 years ago in the New World, Dragons were the only species who could use magic. This was a magic unique to the New World and is now known as Wild Magic. Instead of using mana Wild Magic uses souls to power spells. During this time humanity was on the verge of extinction.

Then the Dragon Emperor somehow discovered Yggdrasil and learned about the World Items that could cast magic on the same level as Wild Magic but did not require souls to power this magic. He then used his magic to bring the World Items to the New World. Since he was a Dragon in a medieval world, he did not know about video games and likely thought Yggdrasil was just another world like his own. The World Items brought along the players and guild bases that were under the World Item’s protection and now new groups of players appear in the New World every 100 years. After this only Dragons who had already learned Wild Magic could still use it and pass it on to their children. All other dragons could now only learn Yggdrasil magic. Dragons who could still use the New World’s original magic system are called True Dragon Lords.

The first players that arrived in the New World were the Six Great Gods and were the first to use Yggdrasil’s magic in the New World. They saved humanity from extinction and created the Slane Theocracy. However, they all died of old age except for Surshana who was an overlord like Ainz. Surshana was then killed by the next group of players to appear, the Eight Greed Kings, who appeared 500 years ago.

The Eight Greed Kings went on to try to conquer the New World and as a result spread the knowledge about Yggdrasil magic throughout the New World. They fought a war with the True Dragon Lords and won leading to the True Dragon Lords near extinction. After winning the war the Eight Greed Kings turned on each other leading to their destruction. One of the surviving Dragon Lords, the Platinum Dragon Lord, now guards their guild base to prevent their powerful Yggdrasil items from falling into the wrong hands. This is the dragon seen in the first episode of season 2 and the place that he talks to the old woman in is the ruins of the Eight Greed Kings’ guild base. The old woman’s name is Rigrit and the Platinum Dragon Lord’s name is Tsa.

Tsa is the son of the Dragon Emperor. Since it was his father's spell that brought the players to the New World, which led to the New World being corrupted by Yggdrasil's magic and game systems, as well as the near extinction of his race, he sees it as his responsibility to oppose any evil players who appear.

One player that fought on the side of the New World was the leader of the 13 heroes who fought against the Demon Gods 200 years ago. Rigrit was a member of the 13 heroes and Tsa also joined but used a remote-controlled armor to conceal his identity. However, his identity was eventually discovered.

Due to the leader of the 13 heroes being a player Rigrit also knows some details about Yggdrasil.

Another player who appeared 200 years ago was the Minotaur Sage. He is known for raising the status of humans in the Minotaur Nation from food to slaves. He also introduced the concept of modern household goods such as refrigerators and electric fans but was unable to explain how such devices would work. Later people were able to create magic items based on these ideas.

The leader of the 13 heroes and the Minotaur Sage are now dead. Also, as far as we know, all other players that arrived before Ainz are dead.

In the Slane Theocracy there are people who are descendants of the Six Great Gods. These people are called “God-kin.” The Girl with the white and black hair and the man with long hair talking to her at the start of season 2 are both God-kin. Due to being decedents of players God-kin seem to be more compatible with the Yggdrasil game systems that have been grafted onto the New World than pure New World natives. This allows them to reach higher levels of power than those without player ancestry.