For all intents and purposes, Mundus refers to these heavenly bodies alone, as they themselves float in Oblivion. The Mundus is a collaborative construct created by many divine beings. It was first conceptualized by Lorkhan, who then convinced other et'Ada (except the Padomay-aligned et'Ada, i.e. the Daedra) to assist him in its construction. Of these et'Ada, Magnus became the Architect, who drew up the plans for Mundus.
Some of the et'Ada gave parts of themselves entirely to the creation of Mundus. These became the eight planets of Mundus (not including Nirn); they are also identified as the Eight Divines, or Aedra. Some Aedra gave themselves completely to their creation, and became the Earthbones that form the substance and life of the final planet: Nirn (a.k.a. The Arena). Soon after the planets had formed, Magnus became disgusted at what Mundus was, and so left for Aetherius, his passage ripping a hole in Oblivion (the realm of Daedra that surrounds Mundus and covers it from Aetherius). This rip is viewed as the sun, and is responsible for much of Mundus' magical energy. Others soon followed after Magnus; these et'Ada, known as Magna Ge, left smaller holes, which became the stars. Some et'Ada did not manage to escape or chose to stay on Nirn as spirits. These et'Ada changed into the Earthbones (Ehlnofey) or simply wasted away into nothingness.
Some of the Ehlnofey managed to create a stabilized realm in the unstabilized Nirn, where they could live like they lived when they were godlike. However, there were still Ehlnofey who wandered the world, hardened and tempered by the harsh world. The Wandering Ehlnofey found the hidden land of the Old Ehlnofey and expected to be warmly welcomed by their kin. They weren't and a war broke out. In the end, the entire world was reshaped and the result of the conflict are the four continents we know today -Tamriel, Atmora, Yokuda, Akavir. The first one is the former Old Ehlnofey kingdom, the other three are Wandering Ehlnofey lands. The Mer are descendants of Old Ehlnofey, the Men are descendants of the Wandering Ehlnofey. 
It is suggested in The Elder Scrolls IV: Oblivion that Mundus is actually the Daedric Prince Mehrunes Dagon's plane of Oblivion, and he was banished from it by mortals; however, this could just be the ramblings of the fanatical Mankar Camoran, leader of the Mythic Dawn.
Tamriel is sometimes known as the "Arena"; "for forces are eternally at struggle. Wealth and subjugation, love and loss, life and death and undeath, inviolate laws of nature, and conversely, magical means of breaking those laws. There are some who even speak of good and evil, but these concepts are subjective and not spiritual. Still, they suggest one more of the many struggles in the Arena of Mundus." - Imperial Geographic Society
- The term "Mundus" is Latin for "world" or "universe".
- In The Annotated Anuad Nirn is said to be created by "the interplay of Light and Darkness" as Anu and Padomay wandered the Void, then being shattered into twelve worlds and created from them again.