Laroth was a student of Kyorlin whom his master killed. When he died, his soul was not claimed by one of the gods, so it departed to the underworld (as most souls do). The underworld is greatly controlled by the subconscious minds of its inhabitants, making it essentially be identical to whatever the dead would dream. The torments one faces are solely created by one's subconscious guilt, so innocent children enjoy an eternity of plesant dreams. Loroth was the first (as far as we know) to discover the power one can command simply by dreaming it, and the first to have enough control of his subconscious to consciously control his environment. Knowledge of spirit magic probably helps.Essentially, his soul is dreaming lucidly, and these dreams come true.
He is trying to build an army to overthrow Arawn and claim Godhood for himself. Many of Arawn's angels, who are upset with Arawn's refusal to get involved in creation and desire a more active god of death, have sided with Laroth. However, he has had trouble gathering armies to serve him, since most of the dead are too caught up in their own dreams to realize what is going on. He needs souls of strong wills, such as only the greatest heroes of Erebus have. It is for this purpose that he created the netherblade, imbued it with souls from his realm, and gave it to one of his angels to give to Rathus Denmora.
I don't think Laroth is mentioned directly in the civilopedia much, but he is very important to the backstory of the Sidar, Malakim, and Illians. After he died, Laroth somehow captured a large number of Elves and made them his slaves in the underworld (although they themselves were still alive). These were neither Light Eves nor Dark Elves, since this was before the split, but living in the sunless underworld/shadowed vale for so long made them look like Svartalfar. Varn's father lead a rebellion of the "Once Elves," and they managed to escape out of the Underworld and into the Shadowed Vale, which was separated from Creation by an impenetrable mist. They took several powerful artifacts with them, including The Heartstone and some books of magic. Not all the elves escaped, including Varn's father. VArn's older brother then became king of the Once Elves.
Years later, Auric Ulvin and the children he was traveling with stumbled into the Vale. It seems the hearstone went missing about this time, and Auric was blamed. Varn's brother demanded the children be executed. Before the sentence was carried out, Varn's wife, Talia Gossam, met with Auric. She was the first to recognize his true magical potential (because he is a reincarnated god) and may have taught him some magic. Varn believed that the children were innocent and tried to sneak them to safety. When his brother's warband were about to kill them all, Auric reached for whatever mana source he could find to fight them with. This source was the Sun, which then ripped though and destroyed the mist that separated the Vale from Creation. Most of the Elves, who had never seen sunlight before, were blinded, but Varn saw Lugus in the light, and became his chief priest.
When they escaped from the Vale, they took some things with them. This includes some of Laroth's books of magic, including such knowledge as how to consume your own soul in exchange for immortality. They were latter used to create the first Sidar.
The Sidar worship, or at lest revere, Arawn, but he does not care. (However, the archangel of Death, Gyra, has intervened to help them, at least when her twin Basium was trying to wipe them out.) Rathus Denmora was especially reverent of Arawn, and sought to go the the underworld (though the portal that the Once Elves used to escape into the Shadowed Vale) to serve him. He was not aware that this portion of the underworld was Laroth's domain, or that the angel he met was not loyal to the god of death. He has no way of knowing that he is actually serving Laroth, and helping him to gather an army to overthrow the god he sought to serve.
With the exception of Kyorlin (given eternal youth by Ceridwen), Os-Gabella (true immortal), Barbatos (now a lich), and Perpentach (whose body is long dead but who finds new hosts) I'd expect all the human sorcerers of the Age of Magic to be dead. The Elves might still be around. I'd assume that Trenton is dead to, since his race is extinct and I think he returned to them just before they were wiped out (because he refused to summon his god and start a new godswar). However, the only ones I know for a fact are dead are Laroth and Gastrius. A copy of Gastrius lives on in Perpentach. It may be that most of these sorcerers now serve Laroth in the underworld, or have been processed into demons.