What Happened During the Shattering?

The Shattering is the war that took place before the events of the game, and it's the reason the Lands Between is in the fractured state you find it in. The short version: Marika's son Godwyn was killed - not a normal death, but one enforced using the "Rune of Death," which mattered enormously in a world where the Golden Order had effectively suspended true death for everyone else.

In response, Marika shattered the Elden Ring itself, scattering its Great Runes among her remaining children. Rather than uniting to restore it, the demigods turned on each other, each claiming their own shard and warping their own territory to reflect their personal obsessions and, in several cases, their own growing madness. Limgrave's Godrick began grafting other creatures' limbs onto himself; Caelid was ravaged by the Scarlet Rot under Radahn's failed war against Malenia; Leyndell's own succession dissolved into infighting between Morgott and Mohg.

Why grace stopped calling

With the Elden Ring broken, the Golden Order that gave the Tarnished their purpose (and their guiding grace) fell apart too, which is explicitly why the Tarnished were exiled in the first place - there was no coherent order left to serve. The game begins only once that grace mysteriously starts calling exiles back, positioning the player to do what none of the demigods managed: end the war and choose what comes next.