The High Elves were originally part of the Alliance. They were an ancient, proud, powerful, extremely successful society, that immersed themselves completely in the power of the mystical fount of power called the Sunwell. They were at the time, and continue to be the most powerful wielders of the Arcane on the face of Azeroth, their history stretching back to the time that the original Highborne began using the magics of the well of eternity. This however was their downfall. Once he had destroyed Lordaeron, Arthas Menethil drove his new Scourge legions into southern Quel'thalas. Based in Deatholme, he corrupted the southern half of Quel'thalas into what is now known as the Ghostlands. Sylvanas Windrunner, ranger-general of the High Elves, fought as hard as she could. Arthas was too powerful. He blazed his way through all defenses, right up the center of Eversong. His path is now visible in-game as the Dead Scar, a wretched strip of plague-corrupted land splitting Quel'thalas in half. Eventually he reached the gates of Silvermoon itself. All the defenses of the High Elves were brought to bear, but they simply had not been prepared, and the Scourge was and would be the most powerful entity ever encountered by Azeroth. He breached the gates, and killed every High Elf in the city. King Anasterian, his family, and the Convocation were slaughtered. All that remained in Quel'thalas were shambling corspes, and Arthas continued on. He froze a piece of the north sea between Silvermoon and Quel'danas, the island of the Sunwell. What remained of the elves was located here, and he destroyed all petty resistance including the remnants of the Spellbrakers, who were based there. Once he reached the Sunwell he immersed the remains of the Necromancer Kel'thuzad in the magical waters, ressurecting the dark wizard and corrupting the symbol of the High Elven people, and the center of their life and power.
The humans who had been the Elves allies did not send help. Quite honestly they didn't really have anything to send, and it wouldn't have made a difference, but some still saw it as a betrayal. However the worst was yet to come. Kael'thas Sunstrider, Anasterian's wise and well-loved son, had been residing in Dalaran with almost ten percent of the High Elven population. Dalaran was originally built by the Elves to teach humans magic as part of a pact made with the humans during the original Troll Wars of Lordaeron and Quel'thalas. Leadership of the city had since been taken over by the Kirin Tor, a council upon which sat several representatives of both races. After it was inhabited by the Scourge during the second war, the Alliance forces in Lordaeron retook the city under Grand Marshal Garithos, the Alliance commander at that point, who was horribly racist against all non-humans, but High Elves especially. He sent Kael's forces to do menial tasks, particularly they were supposed to repair observatories across lake Lordamere. The docks had been destroyed, and the Prince, on order to follow his orders, accepted the offered help of a naga witch, Lady Vashj to get across the lake. He completed his task and returned to Graithos. He condemned Kael for consorting with naga, tellign him he wouldn't tolerate 'treason' (Though these particular naga were no threat to the Alliance at that point). Garithos then sent the Prince to take out advancing Scourge forces, but recalled all the humans back to other posts. Left with only his fellow Elves, he realized they would no doubt fall. he simply didn't have enough soldiers with him. He cautiously accepted again the offer of help from Lady Vashj. Together they defeated the enemy Scourge. They began to speak, and the Prince mentioned the 'emptiness' that his people were experiencing. The naga revealed to him that his people, like hers, were addicted to magic and without the Sunwell would go into a horrifying withdrawal (By Blood Elven lore accounts it has been described as a horrifying, all consuming, extremely painful, indefinite, worst-the-world-has-ever-seen, fatal withdrawal, for multiple reasons.). Garithos and his men apporach and see Lady Vashj. Garithos smugly told Kael that he now had all the proof he needed to deal with him and the other elves as he felt they deserved, and he had them all imprisoned in the Dungeons of Dalaran. Lady Vashj crept through the sewers of Dalaran to release them, fleeing through a portal to Outland.
There the Naga and the Elves free Vashj's master, Illidan, who explains to Kael'thas that there is no cure for his condition, but offers to provide his people with all the magic they need. He pledges himself to Illidan (Who was really a good guy at this point. You have to remember that although his methods were sometimes questionable, he always did the right thing and was almost always foiled by someone who didn't understand. Usually Malfurion and Tyrande. Ironically if they had stayed out of his business, Illidan may have destroyed Northrend and the Lich King shorty after the fall of Quel'thalas, saving countless lives.) and send Magister rommath back to explain the situation and offer hope.
At this point the Elves had reinhabited Quel'thalas, and rebuilt the western half of Silvermoon. They renamed themselves Blood Elves in honor of their fallen brethren. Rommath comes back, telling his people that Kael'thas has found them a new source of power. They can siphon magic from living beings, generally represented as the iconic mana worms. Almost everyone agrees to this. There are however a few, most of whom were not at the fall of Quel'thalas or the betrayal by Dalaran, who refuse to do this. They think it is horrifying, and speak out against it. The elves at this point are experiencing the beginning of their withdrawal, and want to do whatever it takes. This causes extreme turmoil in what remains of the society, and Regent Lord Lor'themar Theron banishes those who won't do it, not because of their beliefs, but because he can't afford to lead a divided, even more weakened nation at this point. They retclaim their old name and leave Quel'thalas. It's been speculated that had he not done so a civil war would have erupted. This is really the division between the Blood Elves and the High Elves. For the most part, the High Elves didn't go through what the Blood Elves did. They were elsewhere, and so they don't hold a grudge against the Alliance for their betrayal.
After that a few things happen. Kael'thas betrays Illidan after being corrupted by the Legion. He eventually tries to reignite the Sunwell and bring Kil'jaeden through it, but we stop him and the sunwell it purified by the sacrifice of a dying narru.
In hindsight everything turned out for the best, besides Kael'thas that is. The differences between the High Elves and the Blood Elves would have destroyed what remained of the society, especially if both were experiencing the withdrawal. If they all took the side of the High Elves they would have never been powerful enough to continue as they did. Now all that keeps them apart is old grudges. Dalaran has never been the same, it's now lorded over by humans and High Elves, both of which hate Blood Elves, so although they claim to be neutral they really aren't. It was one big mess, resolved for the most part.
I just wished they wouldn't have !@#$ed up Kael'thas, or Illidan for that matter. They were such great characters that people still love them, even after everything. There was no reason to do what they did.