The God's times of ruling is almost closing in. Falis, the supreme god of Light, had his army fighting with those of Falaris, the supreme god of Darkness.
In the end, each side had only one survivor. Marfa - The mother goddess of Creation and Kardis - The evil goddess of Destrction. Anyways, they confronted each other..seeing who would be the victorious one.
In the battle, Kardis and Marfa destroyed each other. With her dying breath, Kardis cursed the land with because she was mad of her defeat. Marfa with her last of her power separated the cursed land into the island of Lodoss, protecting the rest of the continent of Alecrast.
Marfa's spirit came to rest upon the island to protect it, knowing how Kardis would spoil things up a bit. Kardis' soul died in land of Marmo. When it was over, a new land sprung forth, broken away from the rest of the continent. The final forces of light & dark died away.
Thousands of years went by; by the time the OAV starts, the land south of Alecrast became known as Lodoss...which they describe in the OAVs as "The Accursed Island." (imagine a really scary man saying it!)