The first chapter covers a span of seventy years in England, beginning in 1916, during World War I.
Spiritualism, the belief that spirits in the afterlife could be contacted via mediums, was at its height and was a subject of intense curiousity to the uninitiated. Many people who had lost friends or relatives in the war would have gone to a medium or magician, desperate for contact with their loved ones.
The story begins in a country house in Wych Cross, East Sussex. These houses were often secondary homes for wealthy city dwellers. The land was both a status symbol and a source of income, and it provided the owner with a sedate refuge from city life.
This unnamed house is the headquarters of the Order of Mysteries, a magical cult which performs rites and ceremonies in its cellar.
Time passes quickly – through the Great Depression, World War II, the Cold War, and the age of the hippie in the '60s-'70s (during which the Order of Mysteries became something like a New Age study group) – and finally comes to rest in 1988.
The 1980s was a decade of change on a global scale, bringing technological innovation and social liberalization, including gay rights and more substantial workplace roles for women. Hard rock, heavy metal and punk subcultures flourished. Margaret Thatcher was Prime Minister of the United Kingdom, the first woman to hold that office. The AIDS pandemic was identified in the early years of the decade. It is against this backdrop that the rest of the book takes place, both in England and elsewhere.
Much of Preludes and Nocturnes takes place in The Dreaming, a realm constructed of dreams, in which dreams take form.
Dream is Lord of this realm, able to manipulate its structure as he chooses, taking his materials from sleepers' dreams. He may be able to transform things he finds in dreams into real objects in the waking world. He is also able to transport certain people into the realm, sometimes permanently.
Most of the locations in the Dreaming are changeable, but there are a few landmarks: Dream's castle, Dream's library, and the House of Mystery and House of Secrets where Cain and Abel live. Later books add further locations.