The early history of Dungeons and Dragons is impossible to separate from the World of Greyhawk for, in the most part, they were the same thing. When Gary Gygax first heard of Dave Arneson's fantasy campaign Blackmoor, he threw a set of rules together, and soon his group were adventuring into the depths of Castle Greyhawk. The rules he created grew to become Dungeons and Dragons, and were added to primarily through development in Gygax's Greyhawk campaign.
Thus, the World of Greyhawk is the oldest campaign setting for Dungeons and Dragons. Although the first supplement to the original D&D; game was called "Greyhawk", in truth there was little information on the world of Greyhawk within its pages; more correctly, it was filled with encounter ideas that had seen their birth in the Greyhawk campaign. It wasn't until 1980 that Gygax first produced the original Folio edition of the World of Greyhawk; it contained maps and a 32-page book describing the lands of the Flanaess
In 1983, Greyhawk was released in greater detail with the World of Greyhawk boxed set; it had the same maps and an expanded Guide to the World of Greyhawk; it also had an accompanying glossography, with various gaming details about the world - including stats for deities, quasi-deities, encounter tables and a table of random birthplaces, much of which had first appeared in the pages of The Dragon, and was due to the work of Len Lakofka.
Most of the earliest modules for Advanced Dungeons & Dragons were set in the World of Greyhawk; the 1983 Glossography gives the map locations of many of them. There is no doubt that the most influential and classic of the early modules are G1-3 Against the Giants, D1-3 Descent into the Depths of the Earth, A1-4 The Slavers, and S1 Tomb of Horrors.
It is unfortunate that Gygax's version of Castle Greyhawk - the original D&D; mega-dungeon with over 60 levels and sublevels - has never been released. The module WG7 Castle Greyhawk holds no relationship to the original castle, nor indeed Greyhawk, and is not considered canon. The module Greyhawk Ruins is a far more authentic version of the castle, though still not being the genuine Gygax article. Although Gygax has occasionally mentioned producing a D20 version of the castle, at this point such still seems a long way in the future.
Gary Gygax had one main co-DM of the Greyhawk setting, although I believe that many of his friends ran sessions from time to time. That co-DM was Robert J. Kuntz, whose primary character in the setting was Lord Robilar (Gygax's was Mordenkainen, though both had diverse other characters). Robert Kuntz is currently releasing D20 modules originating from his DMing in the Greyhawk campaign. The first of the Maze of Zayene series is out now, the other three to follow soon.
Greyhawk's world is known as Oerth, and is considered to be an alternate version of our own world. The continent that is detailed is called Oerik, and the easternmost section of it the Flanaess. It is in the Flanaess that all of pre-3E supplements and adventures are set. You can consider the Flanaess as being analogous to Europe, although Europe seen in a distorted mirror (and flipped, east to west). To say of someone that they are a Easterner is the same as in our world saying that they are a Westerner - something that can be quite confusing to the uninitiated!
The Free City of Greyhawk and Castle Greyhawk
Close to the centre of the Flanaess is the Nyr Dyv, the lake of bottomless depths. Just to the south of it stands the Free City of Greyhawk, a trading centre which owes its current prosperity to two things: one, its commanding presence on the Selintan river, which links the Nyr Dyv with the Azure Sea. Two, the wealth recovered from the dungeons of Castle Greyhawk, a structure that stands just a mile or two away from the City.
Castle Greyhawk was built by Zagig Yragerne, one-time mayor of the Free City. As the years went on, Zagig became more and more eccentric, and spent much of his time constructing the dungeons beneath the Castle. Eventually he disappeared altogether, and the castle was forgotten.
In more recent years, adventurers discovered that whilst the dungeons beneath the castle were quite deadly for the unprepared or unlucky, there existed great quantities of treasure for the brave and fortunate. The Free City, which had been slowly fading, grew rapidly under the influx of wealth, and began dominating the trade routes once again.
Castle Greyhawk remains as a place providing much adventure and magic.
The Twin Cataclysms
Almost one thousand years before the present day in Greyhawk, two empires on the western edge of the Flanaess warred against each other. They were the Suloise Empire and the Baklunish Empire. Eventually, the war escalated beyond most mortal imaginings, and they were both obliterated. The northern Baklunish Empire called down the Rain of Colourless Fire upon the Suloise, which burnt and destroyed anything it touched. Where the once fertile Empire stood, only a barren desert remained - the Sea of Dust.
As the Rain commenced, the Suloise retaliated with the Invoked Devastation. Exactly what it was has never been revealed, but after it, the Baklunish Empire was in the same state as the Suloise, that is to say, not there any more. Some say that the Rain was in response to the Devastation - the truth of the matter is long forgotten.
Fleeing survivors of the Suloise and Baklunish empires fled east into the Flanaess, driving the native Flan people before them. A fourth race, the Oeridian, also migrated eastward into the Flanaess at about this time.
It is said that remnants of buildings survive under the Sea of Dust, and they hold artifacts and magics of the old Suloise Empire, waiting for brave adventurers to find them. However, the Sea of Dust is extremely deadly, and few return from even its border reaches.
The Great Kingdom
New kingdoms and petty principalities arose in the Flanaess after the twin cataclysms, and the usual sort of wars ensued. Eventually, one tribe of the Oeridian people, the Aerdy, rose to dominance in the Flanaess, controlling almost all of its area. This empire (for such it was), called itself the Great Kingdom of Aerdy, and dating in the Flanaess is from when the Overking was first crowned - we called it the Common Year.
The Great Kingdom serves a role very similar to Rome did in our own world. Since its days of controlling all the Flanaess, it has declined. It is now ruled by the fiend-seeing Naelex dynasty, and only controls the eastern half of the Flanaess, other kingdoms and states having taken over its area. It has slipped into decadance and evil, and now only marginally considers what is occuring past its borders.
Furyondy and Iuz the Old
In the western half of the Flanaess, the Kingdom of Furyondy is recognised as one of the leading forces for good and stability. Unfortunately, its efforts are greatly hampered by the continuing threat of the half-demon Iuz, who rules a large kingdom directly to the north of Furyondy. Iuz is regarded as a demi-god by his people, and certainly claims great power and a dedicated priesthood.
Iuz is served by many humanoids - mainly orcs and goblins - and his lust for conquest is unmatched on Oerth. His plans received a severe check a few decades back when he was imprisoned under Castle Greyhawk by Zagig, but in 570 C.Y. he was released by a pair of unwitting adventurers (Robilar and Tenser), and since that day has been reconsolidating his hold on his empire.
Furyondy itself was on the verge of political union with its neighbour, the Archclericy of Veluna, through the wedding of Prince Thrommel of Furyondy to Jolene, daughter of the Plar of Veluna. However, Prince Thrommel was abducted by agents unknown, and the union was called off. King Belvor of Furyondy now rules a land without an obvious heir, and under renewed threat from Iuz.