Plot Summary
In the story, the wizards are transported to Roundworld (the real universe, inadvertently created during the first book) during the Elizabethan era. This is the first time they learn there are humans on Roundworld; they previously learnt that something would escape an Ice Age by heading for the stars via a space elevator, but missed which species it was. They are befriended by the magician John Dee, who is understandably confused by their appearance. Back at Unseen University, the thinking machine Hex informs the remaining faculty (Ponder Stibbons, the Librarian and Rincewind) that history has changed and humanity no longer makes it to the stars. The reason for this is, apparently, an infestation of elves feeding off human imagination and encouraging them to be scared of the dark.
The wizards travel back in time to suppress the elvish influence, but this only makes things worse; people are no longer superstitious, but they are no longer creative either. In the "new" 17th century humans are still in the Stone Age. Then Rincewind suggests doing the opposite, encouraging humanity to be more creative. They travel through time doing this, with the intent of creating a history in which William Shakespeare writes A Midsummer Night's Dream. This achievement is symbolic of a new way of thinking, the human imagination is now sophisticated enough that stories can be told about stories. With the elves now seen as a harmless fiction, their power over Roundworld is gone.
Read more about this topic: The Science Of Discworld II: The Globe
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