Backstory
The first race of Elves in Skyrim were the Snow Elves or Falmer. They existed for generations, later being joined in Skyrim by the Dwemer, or Dwarves and eventually by the Nordic Atmoreans including the to be founder of the Companions, Ysgramor. The three races existed in harmony for a time until the Falmer eventually became threatened by the rapidly growing Nordic population or perhaps after the immensely powerful Eye of Magnus and attacked the Nord settlement of Saarthral, killing all but Ysgramor and his two sons in what would come to be known as the Night of Tears.

Ysgramor then departed back to Atmora to raise an army known as the Five Hundred Companions who returned to Skyrim determined to wipe away all the Falmer from the land. After not being able to hold off the powerful Nordic army the Falmer pleaded to their Dwemer cousins for safehaven. The Dwemers accepted on one condition, that they would eat a fungus from the Dwemer city of Blackreach. The Falmer, seeing no alternatives ate the fungus, however, over time the Falmer began to lose their site from the fungus' side affects. Afterwards the Dwemer enslaved all of the Snow Elves to do their bidding

After the collapse of the Dwemers, the Falmer once again had freedom, however centuries of enslavement had permanently taken away the eyesight of every Falmer and reduced their once great intelligence to that of savages. To this day they still inhabit the empty halls of Dwemer cities and bottomless caves of Skyrim, killing or enslaving anyone unlucky enough to wander into their territory.