I'd say a pokemon thought-experiment would be best suited to describe it. This is how I envisage the universe (it is a bit long, and i'm sorry for that >_<):
Pokemon: Symbiosis
Pokemon, even non-legendary ones, wield immense power. With the conscious ability to control elements and natural phenomena, they have inevitably shaped the world into one of extremes. Hostile deserts stretching across the horizon feed into stormy seas. Overgrown forests taper into icy mountain ranges. Volcanoes, tidal waves, earthquakes, and areas permanently covered in darkness. A human standing from a vantage point would see familiar geological and meteorological phenomena, but in an alien, inhospitable world.
The human habitable area occupied only a narrow band near the equator, where the power exerted by pokemon tended to reach an equilibrium.
However, humans had one thing pokemons did not: technology. Those first brave pioneers who ventured out managed to tame the pokemon, and in doing so, harnessed power. The ubiquitous mass-produced red and white pokeball is a descendant of this hundreds of years of tradition and technological perfection.
In this symbiotic relationship, Pokemon and Humans flourished--the former, with the humans' methodological training, were able to perceive the full potential of their power, and the latter, with the taming of the former, were able to expand their species throughout the globe, from the equatorial savannas to the polar tundras. Earth turned into a veritable paradise. Weather stabilized, and her temperate seasons became the spring, summer, fall, and winter as we know it today.
However, with this symbiosis, the prospect of global destruction became a reality. Where internal strife wracked the world of pokemon, battles amongst each other ensured equilibrium. Humans were then too sparse and spread out to make any difference. But under the humans, there was unity, and also power. And where there are both, there was greed and ambition. A sufficient amount of magnetons could permanently disrupt the Earth's magnetic field. Enough rock type or ground pokemon could destroy a continent. Even individually, each pokemon was a deadly weapon contained in a pocket device that fit a palm. The world was on the brink of warfare an imminent collapse.
In response to this, the Pokemon League, a global organization, was formed. It was decided that the ever present availability of pokemon made control of them impractical, and no one seriously entertained the costly and bloody idea of eliminating all the world's pokemon. How would one fight nature? Instead, it was decided that if one could not control the power, one could control how people treated power.
Thus was the birth of the Trainer.
The legend of the League Champion was created. Children from an early age were given pokemon, and were indoctrinated into battles. There were very specific rules. Lethal moves were prohibited, as well attacking other trainers, and in order to foster a taboo on killing, attacking other pokemon while unconscious was stricly forbidden. The penalty was a lifetime expulsion from the League.
The children were indoctrinated from an early age to look up to the glory of the League Champion. Even to be part of the organization of Elites was an honor. Thus, the tendency for violence was controlled--for they wanted glory too much too risk it all for petty outbursts. This went on for several decades. And once, more, as with the taming of the pokemon, there was stability and peace.
However, there grew a sect of Trainers, not wishing to be bound by the League rules. Called Team Circuit, they are rumored to contain numerous grassroots and Elite trainers, as well as a few in positions of high power within the League. Their goal is to free man and pokemon from their artificial hierarchy. Many hark back to the days of the early symbiosis--where humans and pokemons realized new avenues of power. And there is no telling what they may do to break the hegemony of the League.
Factions:
Trainers
League
Team Circuit
and possibly more, say, breeders or coordinators, or even poke-scientsts--it's quite open-ended.
As for the specifics,1 st gen to 5th gen pokemon are fair game. Regions will be original. As for battles-- they wouldn't be turn based as in the gamess, i.e.," Pikachu uses thunderbolt on Mismagius and removes 50 hp". (too mechanical, yeah?)--instead they'd be approached from a (quasi)realistic perspective, i.e., Pikachu releases a barrage of thunderbolts as Mismagius squirms in agony, sending paralyzing shocks throughout its ghostly equivalent of a nervous system. Poor Mismagius =(
And I have written in some tentative locations, more factions, and whatnot --it's decidingly non-canon, of course, and will flesh it out should sufficient interest motivate me to work on this ^^ Tell me what you think.