Lorkhan tricked or convinced some of the other original spirits into creating a great project, the world of TES, Creation which is the Mundus, the world of Nirn.
The spirits who refused to participate remained in Oblivion and are called the Daedra.
Magnus was the architect who created the plans for this project. Only later did the orginal spirits, called the Et-Ada, learn that Lorkhan had not told the whole truth. Creation was unstable. In order to stabilise it sacrifices had to be made. Some Et-Ada dissolved completely into the project, becoming the Earth Bones or laws of nature. Some who bound themselves to Creation invented six and death as a means to keep from dissolving completely. They became the Ehlnofey, smaller and more numerous they were the ancestors of all life. (Except for the Hist.) The largest sprits who remained were powerful enough to keep from dissolving completely after they had bound themselves to Creation. They became the planets which orbit the world of Nirn and are the gods called the Aedra.
Magnus and the Et-Ada who followed him however rejected Creation altogether. They fled the project and their leaving tore holes in the veil between Oblivion (which surrounds Creation) and Aetherius (the realm of magic). Magnus, being the greatest of these Magna-Ge tore the largest hole. This is the Sun, which is the primary source through which magic enters Creation. The smaller spirits who followed him made the stars.
So Magnus is the architect of Creation who refused it when he learned what the project entailed precisely and who left for the realm of magic.
It is not known what exactly the Eye of Magnus is. It is a great source of magic and it is inscribed in an alphabet previously not known in the world of the Elder Scrolls.
The Thalmor are a faction of High Elves. Their chief god is Akatosh, whom they call Auri-El. High Elven culture has always seen Creation as a trap that they wish to escape. They hate Lorkhan and see the world as a place which imposes limits that previously did not exist. The Thalmor wish to unmake the world so that they can be free of this trap and return to the realm of limitless possibilities of before. Ancano, the Thalmor who is the main antagonist in the College of Winterhold questline, thought he could use the Eye of Magnus to undo Creation.