Mundus

"Mundus - the world - is a very delicate thing, you know. Only certain rules keep it from returning to the Is/Is Not"

- Urvwel

Mundus is the plane or realm of existence that encompasses Nirn, its moons, and attendant Aedric planets. For all intents and purposes Mundus refers to these heavenly bodies alone, as they themselves float in Oblivion. The Mundus is a collaborative construct created by many divine beings. It was first conceptualized by Lorkhan, who then convinced other et'Ada (except the Padomay-aligned et'Ada, i.e., the Daedra) to assist him in its construction. Of these et'Ada, Magnus became the Architect, who drew up the plans for Mundus.

Some of the et'Ada gave parts of themselves entirely to the creation of Mundus. These became the eight planets of Mundus (not including Nirn); they are also identified as the Eight Divines, or Aedra. Some Aedra gave themselves completely to their creation, and became the Earthbones that form the substance and life of the final planet: Nirn (a.k.a. The Arena). Soon after the planets had formed, Magnus became disgusted at what Mundus was, and so left for Aetherius, his passage ripping a hole in Oblivion (the realm of Daedra that surrounds Mundus and covers it from Aetherius). This rip is viewed as the sun, and is responsible for much of Mundus' magical energy. Others soon followed after Magnus; these et'Ada left smaller holes, which became the stars. Some et'Ada did not manage to escape or chose to stay on Nirn as spirits. These et'Ada changed into the Earthbones (Ehlnofey) or simply wasted away into nothingness.

It is suggested in  that Mundus is actually Lorkhan's plane of Oblivion, and he was banished from it by humans, however this could just be the ramblings of the fanatical Mythic Dawn.

Tamriel is sometimes known as the "Arena", "for forces are eternally at struggle. Wealth and subjugation, love and loss, life and death and undeath, inviolate laws of nature, and conversely, magical means of breaking those laws. There are some who even speak of good and evil, but these concepts are subjective and not spiritual. Still, they suggest one more of the many struggles in the Arena of Mundus." - Imperial Geographic Society

Trivia

 * The term "Mundus" is Latin for "world" or "universe".