So here's the gist of what's going on since the exposition is a bit lacking on the "hinting at" department IMO.

MC is in a world similar to the game.

However, in that strategy game, players are set as rulers and are always of the human race.

What we see here is the elves performing genocide on other races because they think they are the superior race related to gods.

Based on what the elf is saying, it can be surmised that while there are humans there (would-be NPCs perhaps in the original game), since there are no players (not that we know of yet) there is nobody to establish a kingdom to fight what would be the enemies in the game like this elf's country.

MC and his forces have basically been transported into this seemingly game's world, but in a situation and time where the game kept on going but there were zero players to keep the NPCs in check for a long time, so the NPC factions have just pretty much claimed the world for themselves unabated.