The game is set in the United States in the last quarter of the 19th century. The canonical year for the first edition of Deadlands is 1876. A later supplement, Tales o' Terror, advances the game's backstory and metaplot ahead one year, to 1877. The second edition of Deadlands uses the updated backstory of 1877 as the canonical starting point. Deadlands: Reloaded further updates the backstory and advances the canonical starting point to 1879.
The basic rules provide for characters and settings that could be expected to appear in the "Wild West" genre of movies and pulp fiction, and most of the in-game action is presumed to occur in the wild frontiers of the American West, or in barely tamed frontier towns like Tombstone, Arizona or Dodge City, Kansas. However, later supplements expanded the in-game adventuring area to include places such as the Deep South, the Mississippi River, Mexico, and the Northeastern United States. These supplements often provide for adventures set in urban areas such as New Orleans, New York City, or Boston.
The canonical, basic setting is referred to as the "Weird West" due to the juxtaposition of the Western setting with the horrific and fantastical elements of the game. The history of the Weird West is identical to real-world history, up until July 3, 1863. On this date in the game, a group of American Indians from various tribes, led by a Sioux shaman known as "Raven," performed a ritual in an effort to drive out the European settlers. This ritual created a conduit to a spiritual realm populated by powerful malicious entities known as the "Reckoners." The events surrounding and immediately subsequent to Raven's ritual is known as "The Reckoning."
The Reckoners feed on negative emotions, particularly fear. Sufficient levels of fear in the population of a given location allow the Reckoners to begin subtly altering the environment of that location: the sun shines a little less brightly, trees become stunted and "evil" looking, rock formations take on the appearance of corpses or monsters, and so on. The more powerful the fear, the greater the environmental changes.
The ultimate goal of the Reckoners is to turn the entire Earth into an evil, haunted wasteland — literally a Hell on Earth. However, the Reckoners cannot directly enter Earth's realm unless the overall fear level of the entire planet becomes sufficiently high. To this end, they use their powers to create monsters, madmen, zombies, and other creatures and villains that will sow fear and terror throughout the land.
The first instance of this occurred on July 4, 1863, at the site of the Battle of Gettysburg that had just ended; dead soldiers from both sides of the conflict rose from the battlefield and began indiscriminately attacking the surviving soldiers and civilians. Since then, undead gunslingers, hostile Indian spirits, strange cults, and deadly creatures have begun terrorizing the world. The American Civil War drags on thanks to the machinations of the Reckoners, and the country remains divided into U.S. and Confederate sections along with "disputed territories." Federal agents and Texas Rangers struggle to deal with the eldritch menaces while hiding the awful truth from the general public. Seismic upheavals have pushed much of California into the ocean, creating a badlands area known as "the Great Maze." In the Great Maze, miners discover "ghost rock," a mineral that burns hotter and longer than coal and is used as the basis for most Deadlands technology as well as alchemical potions and semi-magical materials.
The unleashing of the Reckoners has had a number of important side effects. Magic was revealed to be real, although it involves challenging otherworldly spirits, "manitous", in contests that are either viewed as a negotiation or a test of will. These same manitous can possess a recently deceased body and reanimate it, creating a "Harrowed". Harrowed beings are sometimes under the control of the spirit (which uses the opportunity to spread fear) and sometimes under the control of the deceased being. Scientific progress rapidly advances as the Reckoners support experimental designs that normally would not work. This progress drives the technological level of Deadlands from historical levels to a "steampunk" setting.
Players take on the role of various mundane or arcane character types, including Gunfighters, Lawmen (such as U.S. Marshals or local sheriffs), Hucksters (magic users), Shamans, Blessed (those of faith), and Mad Scientists in an attempt to learn about the Reckoning and the mysterious beings behind it.
Source: Wikipedia, "Deadlands: Setting", available under the CC-BY-SA License.