God Wars

Ancient texts from the Golden Age reveal that the gods did sometimes intervene in mortal wars. However, these wars were usually between smaller nations, and the actions of the gods were usually to blunt the actions of other gods. The gods extolled virtues to their followers which sometimes sparked conflicts with disciples of gods with differing views, but these religious dissensions never poured fuel onto the fire of political wars, nor caused the armed conflict to spread to other nations.
It is not known what sparked a small regional war to engulf the entire world, and draw in most of the pantheons of gods. No records from the beginning of the God Wars have been found, and the gods themselves will not say. The oldest wartime records are from several years after the wars began, and only cover contemporary events. Regardless of why the wars began and spread, the gods were by this time heavily involved in fighting on the mortal plane. The various peoples in the war zones were either already engaged in the fighting, forcibly converted to the winning god's religion, enslaved, or fled as refugees to distant lands.
After a hundred years of war, most civilized lands had been devastated and their populations decimated. It was then that previously unknown sorceress founded a new nation on a small, sparsely-populated island. The sorceress followed no god, and thus no god directed followers to attack the island. This soon led to a flood of refugees, and the sorceress declared herself to be a queen.
Needing more room for her growing population, the queen annexed nearby coastal areas which had been depopulated by the armies of the gods. Eventually, she started directing her growing army to annex lands weakly held by the gods themselves. It was only then that the gods realized just how powerful she had become. An assassination attempt orchestrated by one of the gods only resulted in her transformation into a lich. The Lich Queen then started sending large armies of undead against the mortal armies of the gods.
At the outset of the Gods Wars, the god of the Gnomes had declared his neutrality, and directed all surviving gnomes to return to their ancient homeland. When the Lich Queen's armies arrived at their border, she demanded their surrender. Their refusal contained several insults which greatly angered the Lich Queen, and she lashed out, killing the last of the gnomes. Some say that she killed the gnome god himself, but most scholars believe that he simply has no reason to make his existence known, since no gnomes live on Norath anymore.
The remaining gods finally set aside their differences in order to face their new common enemy. The gods assembled a band of mortal champions from all their followers, and equipped them with powerful artifacts. The Lich Queen appears to have been injured and/or exhausted in her victory over the gnomes, and retreated to her capital to recuperate. The gods' champions infiltrated this magical nexus and somehow managed to destroy it. The champions were killed in the resulting explosion, and the worldwide devastation became known as The Shattering. The Lich Queen's physical form was also destroyed, but it is said that her spirit wanders Norath to this day.
Thus ended the God Wars.

Divine Limitations?

Some scholars secretly claim to have found evidence that the gods displayed less power in their actions on Norath in the later years of the God Wars. One theory put forth is that the gods have a finite amount of power, and that their reserves had run low due to many years of war. Another theory is that the gods derive much (or even all) of their power from the worship of their mortal followers. The smaller populations of worshipers in the later stages of the war would then provide less power to their respective gods.
These theories could also help explain how a mortal sorceress was able to challenge the gods themselves, and possibly even kill one of them. However, these views are considered to be heresy by religious leaders, so no sane scholar voices them publicly.