Part I: A problem of blood
Thousands of years ago, spirits were everywhere, and the magic of the earth was very powerful. The spirits fed off of the natural magics in the air and had limitless power. Humans were a relatively new race that had their own brand of magic. A thousand years ago, humans and spirits co-existed and lived in tandem with their natural magics.
In times of old, spirits sometimes found humans very attractive, and bred with them. Hundreds of years ago almost all humans had at least a drop of spirit blood. The two races inter-bred to the point where some races developed of purely mixed beings, capable of being indistinguishable from either human or spirit.
Over time, humans began take their environment for granted. Some began to fear the powerful giant spirits of the forest, and resent the penance they had to pay to them to use their forests. Over time the spirit of mutuality between humans and spirits faded. Humans lost touch with their own magic, until many were born without any magic in them at all. Some humans killed spirits and lost touch with ancient rights. They stopped communicating with nature. Over time, the magic in the areas eroded, and the spirits left, no longer having any reason to stay.
Humans developed a natural aversion to that which they were not; and mostly avoided areas filled with magic by instinct. Similarly, magic-less humans have no interest to spirits. However, though over the generations spirit-blood was bred out of the majority, many still were born with drops of spirit blood. These individuals often hid origin of their gifts and used them to become leaders or healers in the community.
However, not all humans with strong spirit ancestry disappeared. When the erosion of magic and the fleeing of spirits first occured, those strongly connected to their spirit families and natures founded clans to continue their way of life. Though through necessity they often had to mate with humans or risk in-breeding, and though their understanding of their rites and their magics faded over time, over the ages they still contained untouched spirit blood. Some spirit clans worked within more spiritually-inclined villages as police forces or healers, and others set up camp away from other villages, isolating their way of life and selling services as mid-wives, potion-makers, and mercenaries to make any needed money.
As for any human societies truly in touch with the spirits, as connected as they used to be a millennia ago, it is rumored they still exist. They would have withdrawn when the spirits did, setting up villages hidden in the forest or the mists, where the humans and spirits inter-bred and everything was contaminated with the scent of magic. If they did exist, which many doubted, they kept their whereabouts hidden. But it was the cherished dream of the clans to obtain the blood and body of such a creature, for soon their way of life would be wiped out without it. Inter-breeding with humans as a matter of necessity was one reason; and for another, over the ages without much contact with spirits, their magic and understanding of how to access and preserve it had begun to weaken.
One such clan, the Uchicha clan, had sent away their most promising and of strong-spirit blood youth, to find either friendly spirits to work with, learn from, or perhaps, if they were lucky, to mate; or to find one such "hidden village". But upon his return he was mad with demonic spirits inside him. The Uchiha feared either the spirits left in the forest were only demons, hostile to humans, or their magics had degraded to where they could no longer handle uncontaminated spiritual energy without going insane. So they focused all their hopes and energies on their youth to find a half-human, half-spirit, to keep the clan alive.