The Beginning of the End
The Eldar were a technologically advanced race, generally considered the most intelligent race in the galaxy at the time. Their ancient empire spanned the Milky Way Galaxy, and the only intelligent race that could have challenged them, the C'tan and their Necron slaves, lay in hibernation on their Tomb Worlds across the galaxy. They had unparalled mastery of the warp, to the extent that they could control it to create physical elements like Wraithbone. The fall of the Eldar empire came about not by an enemy, but by themselves.
Eldar technology had advanced so far by the height of their empire that little or no work was required by individual Eldar. As a result, at some point around the 24th or 25th Millennium, groups of Eldar began forming groups known as Pleasure Cults dedicated to the pursuit of experiencing every sensation, pleasurable or painful, that life had to offer. As the Eldar's emotions are often more powerful than those experienced by Mankind, they were capable of the dedicated pursuit of sensation in a way that even the most sybaritic members of the human race would find difficult to comprehend. These pursuits became more extreme, hedonistic and depraved as time went on. Torture and murder came to be seen as art forms every bit as worthy as poetry, music and painting. The Eldar were extremely long-lived (even immortal before they were cursed by the Nightbringer), never suffered from senility or disease, and their superior intellects, deep emotional resonance and potent psychic powers allowed them to perfect their skills to a degree far beyond that of even the most talented humans. The Eldar were able to devise cunning new ways of torturing and killing their fellows at rates never imagined.
Government within the Eldar empire soon collapsed and the degeneration of their homeworlds and colonies into utter depravity continued unimpeded. As the pursuit of ever more extreme experiences reached its height, death reigned in the streets of Eldar cities, hunter and hunted each being part of a twisted ritual of destruction which consumed millions of lives. Some Eldar were able to see that their now-corrupt society was destroying itself, and fled in disgust; these refugees would settle in the distant planetary colonies of their empire and would later be known as the Exodites.
Upon dying, the soul of any sentient deceased being traverses the bounds of the physical realm and goes to rest within the Warp. Generally, this has no effect on the physical realm. The Eldar, however, are quite different. The psychically-gifted Eldar have powerful souls and register a much stronger presence in the Warp than do the vast majority of humanity, most of whom possess no psychic abilities.
The deaths of hundreds of thousands of Eldar in extremely pleasurable and/or painful ways -- and the massive amount of their souls into the Warp -- had an unintended, and catastrophic, side-effect: The restless souls of the dead Eldar caused the formation of terrible Warp Storms, which made interstellar travel extremely difficult in the physical realm (This was one of the factors that led to what humanity calls the Age of Strife). A far worse effect, however, was that these souls began to somehow coalesce into a larger entity, a living, psychic embodiment of the corruption that had taken their lives. As more and more Eldar died to fuel the decadence and depravity of their society, this entity continued to grow, and the Warp storms continued to grow worse.
In the early 30th millennium, this great warp entity finally attained full sentience. In the last few years before its birth, many Eldar were driven insane by the uncontrolled psychic energies possessed by this embryonic entity. Many Eldar who had stayed behind on their homeworlds to try and turn their race away from the decadence that had consumed them saw what was happening and knew that something terrible was about to occur. These Eldar left the empire behind, fleeing aboard colossal spacecraft called Craftworlds and taking any plants, animals or other pieces of the Eldar culture and their homeworlds' environments with them.
At last the entity suddenly came to life, and was said to have "taken its first breath"; this first 'breath' instantly slew the overwhelming majority of the Eldar who lived in the empire as their souls were 'inhaled' by the entity. The death toll was so massive within the Eldar empire that Warp energy literally spilled over into the physical realm, creating a permanent interface of realspace and Warpspace later known to the Imperium of Man as the Eye of Terror. Even the Eldar who had fled their empire were affected -— many Exodites and Craftworlders fell dead as their souls were also sucked from them. As well, many psykers (futuristic mages) of other races were also driven insane or killed by the power that had been unleashed. This new entity became the fourth major Chaos god, Slaanesh, the Prince of Pleasure, and the Eldar empire was no more.
The Dark Prince of Ecstacy
Slaanesh's first act after annihilating so many Eldar was to hunt down their gods, who also existed in the Warp. As they had with Slaanesh, the psychically-gifted Eldar had previously created their own pantheon of gods from their collective desires and beliefs' affect upon the energies of Warpspace. With the sudden deaths of so many Eldar, the old gods were drastically weakened. Slaanesh took advantage of this weakness and destroyed them, assimilating them within itself. Unlike the other intelligent races of the galaxy who see the youngest Chaos God as male, the Eldar consider Slaanesh to be female, and refer to her as "the Great Enemy" or "She Who Thirsts." Ancient Eldar Gods, such as Kurnous, Isha, Vaul, and Asuryan were hunted down and consumed by Slaanesh.
However, among the death and destruction, two of the original Eldar Gods survived. It is said that the Eldar God of War, Kaela Mensha Khaine, fought Slaanesh, and neither was able to defeat the other — Khaine, being a War God, could not be defeated in battle, but Slaanesh was far too powerful for Khaine to defeat agter the death of so many Eldar. Some tellings of the story state that in the end, the Chaos Blood God, Khorne, interceded on Khaine's behalf, likely with the aim of absorbing the Eldar god of war himself. Regardless of the actual events of the battle, the result is clear: Rather than be absorbed by the more powerful Chaos Gods, Khaine's form was shattered and exiled to rest in the mortal realm in the form of great statues called "Avatars", which rest in the hearts of the various Craftworlds, while pieces of Khaine's soul reside in the Infinity Circuit of the Craftworlds and can be called upon in times of emergency to animate the Avatar--though the price is high in blood for this boon.
The other Eldar god to survive the Fall was the trickster God Cegorach, also called the Laughing God. He is said to have hidden himself behind Khaine during the great duel with Slaanesh; when Khaine was finally banished, the Laughing God hid himself within the labyrinthine confines of the Webway, the Eldar pathways through the Warp, where he still resides. Occasionally he reenters the Warp in order to play pranks upon Slaanesh, most famously to rescue the souls of certain Harlequins from consumption by it.
After Slaanesh's birth and its war with the Eldar gods, the few surviving Eldar found their society in ruins. They were split into factions, and were forced to find ways of protecting themselves from Slaanesh; with Slaanesh's existence so closely tied to the Eldar race, any Eldar who subsequently died had his or her soul instantly consumed by the ever-hungry "Great Enemy". The new Eldar factions — the Craftworld Eldar, the Dark Eldar, the Harlequins, the Eldar Outcasts, and the Exodites — each found their own ways of dealing with the curse of Slaanesh.
The Fall of the Eldar was a major event on the galactic stage. Firstly, the Eldar empire was extinguished, leaving behind the Eye of Terror that has threatened Eldar and the Imperium alike for ten thousand standard years. The forces of Chaos gained another powerful patron in the new Chaos god Slaanesh, making what is known as the Ruinous Powers a further threat to the existence of mortals; however, Khorne's interference in the Slaanesh-Khaine duel caused a rift between Slaanesh and Khorne, and is one of the reasons why the two gods and their followers continue to be enemies. The Eldar went, virtually instantaneously, from being the most powerful force in the galaxy to being a species comprised of a relatively small groups who struggle to survive and preserve their culture. The various Eldar factions are reviled by other races for their tendency to focus on their own survival, often at the expense of those other races' well-being, and for the treachery and subterfuge they have often employed in this effort.
The birth of Slaanesh had the side-effect of clearing the galaxy of the Warp Storms associated with the era immediately prior to its birth. This allowed interstellar travel and communications to resume; the human leader known as the Emperor of Mankind was able to take advantage of this to unify humanity under his leadership on Terra and Mars, end the Age of Strife, and begin his epic Great Crusade, which would see the forging of the galaxy-spanning Imperium of Man, which would attempt to fill the power vacuum in the galaxy left by the near-annihilation of the Eldar.
Some Eldar did learn from their mistakes. Knowing that their psychic prowess has profound effects upon the Warp, some far-sighted leaders among the Craftworld Eldar have noticed the slow growth of a new deity, Ynnead, the Eldar God of the Dead, within the safe confines of all the Eldar Craftworlds' Infinity Circuits. The Eldar hope that if and when Ynnead is finally born, he will confront Slaanesh and defeat it once and for all. But as the great Eldar Farseer (spiritual leader) Eldrad Ulthran has noted, this will take thousands of years at the very least, and Ynnead's awakening will require the passing of every Eldar soul linked to the Eternal Matrix - effectively destroying the Eldar's past even as it might guarantee this faded species a new beginning.