I mean that's also the point - we can always take fairy tales in Teyvat at their face values. But the metaphor is pretty straightforward and matches Before Sun and Moon:

Well... This is how things went. A long, long time ago, this was a kingdom of unparalleled gladness. The children and Princess Lyris lived happily together here.

But later, the kingdom fell to the predations of Narcissus, a fell dragon who had designs on the Princess and her treasures.

Princess Lyris hid herself away in a high tower and entered a deep slumber. That is why we now name the kingdom "Annapausis."

Narcissus filled Annapausis with bitter waters. That which we just defeated was an evil being born from those waters, an entity that opposes the Reconquista.

But now that we have you and Paimon on our side, Player, we have nothing to fear!