Lorekeepers theorize that the moon coalesced around a shard of El that broke free from it when the conflict between Light and Dark began, and the opposing notions of Vice and Virtue were shaped into Mephisto and Apollion.
However, the moon is subjected to constant influences from the Abyss as well, and too far and distant for Sorcery to protect. As such, it is a constant battlefield; Light and Dark fight a never-ending war for dominance over it (or rather inside it; though the lunar surface is barren, the hollow core is a den of ancient civilization and conflict), and the ebbing tide of the Lunar cycle reflects this. The conflict over the spark inside the moon is great enough for it to affect the Magic of the world below, and the dominant side of the battle at any given time is dominant also on the surface of our Earth.
It should be noted that although there are races of sentient creatures on the moon, they concentrate only on fighting each other. There are no ties between the creatures of 'Light' found on the Lunar surface, the Lucen, with the Angels or the other beings of the Great Game. Likewise, the Nocten have no affiliation with the Demons and fight only for Lunar dominance.
In fact, the moon is so isolated a battlefield that it even possesses different Deities; Phosphoris and Vesperius, and is rarely touched by the creatures of the Earth or the Cosmic beings that drift around it. The never-ending battle between the Silver Wilderness and the Shadow Mechanics remains isolated from the world below.
In-Game effects of the lunar cycle
The cycle of the moon (as reflected by the widget on our homepage) slightly affects the powers of Light and Dark magic. When the percentage of Full moon is below 50%, Dark has the advantage, by an amount that scales and increases as the percentage drops. On New Moon, for example, Light is incredibly difficult to use and Dark comes a lot more naturally.
The reverse is also true. When over 50% full, Light has the advantage, by an amount that scales and increases as the percentage does. When it reaches Full Moon, the use of Dark magic becomes very difficult, and Light is a lot more powerful.
This also affects beings of Dark and Light; Demons, Angels, and Elementals of both or either. The influence of Light to do good and the corruption of Dark are also increased or reduced by this. If a character or elemental uses both Light and Dark magic then they simply oscillate between the two; the power level never changes because the strength they gain in one school of Magic is lost by an equal amount in another.