In a very detailed article, the Dark and Light team describes the significance of a character's alignment and faction, and lays out the various orientations (kind of a super-class) and classes available to each race.
First of all, it is really important to distinguish between what we call alignment – belonging to the Dark or Light side – and divine faction – the god you are following. A character can pray to different gods (depending on his race and class restrictions). Among them are Aesir, Agnar, Calder, Hel, Hydra, Malecta, Neutra, Ysatis and Zephyr. No playable character can decide to worship Gothar.
These 9 gods all have some influence on the character, some in a positive way; some in a negative way, but those values are always balanced. This is called divine balance. Each action has an effect on faction standing. The ideal would be to keep a high faction with the god your character is following, but it is in no way mandatory. This said, your divine faction can be of importance if you are attacked by another player whose level is a lot higher than your own. Your god can come to your rescue, rewarding you for your loyalty and devotion.
The Humans and Half-Elves can be agnostic if they wish to do so. They can’t be atheists though, since no one on Ganareth can deny the existence of Gods. Even if they decide not to worship them, they are still under their influence.
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