What happens when people die? Are they swept into the arms of their god to live in bliss or be tortured for eternity? What about the faithless? The atheist? What about non-civilized races?
The answer is simple.
When beings with souls (including animals) die, their soul transitions to the Shadow Realm--coterminous and co-existent with the Prime plane. This is a liminal space, bordering all the planes. Without material bodies to hold them together and anchor them to existence, souls start to fade and dissipate. They quickly lose the subtle parts of their personalities while the stronger memories and emotions linger on. They, in essence, become a caricature of themselves. Strong magic can pull them back to their bodies for a while, but as time goes on and more is lost the difficulty (and thus the scale of magic needed) increases. Within a few months or years, most have completely dissipated and the anima that makes up their souls is pumped back up into the Astral plane by the Great Mechanism to be spread out and form into new souls. This is not reincarnation in that the anima has no connection at all to previous incarnations--no more than a water molecule remembers who it once was a part of.
Some individuals have strong souls. They actively fight the decay of the Shadows and find other sources of energy. Some exist by parasitizing or consuming other souls, becoming the predators of the Shadow Realm. These overlap with the more powerful undead--wights, vampires, liches, etc. Others fight for a place in the Astral plane and learn to tap the supplies of Aether there. These become demigods, members of the Heavenly Choir.
Some individuals were marked by the Powers (whether of the Astral or Abyssal). These are the powerful clerics, the cult leaders, the fanatics. Upon death the Power that claims them intervenes and draws them to their own domain. What happens then is unclear, but many end up as part of the Choir Astral; the chosen followers of the Outcast Gods sometimes pop up as dark Powers in their own right.
Undead (and loving it)
Undead come in two types: mindless and free-willed. A third category (the emotion-fuelled undead) lies between them with overlaps. Undead tend to be destructive and "evil," although exceptions exist. Those that actively seek out free-willed undeath are very rarely nice people motivated by a love of others.
Mindless Undead (Skeletons, Zombies)
These are bodies re-animated by magical energies. These energies can be a natural hotspot of soul energy, the artificial creation of a mage or cleric, or any other such thing. There is no soul--no independent spark of life. They are mere automatons dancing to the will of their creator (or running a simple program). The natural undead (often the result of a large battle that saturated the area with loose soul energy) tend to hunger after life and move in pale imitation of it.
The Emo Undead (Ghosts, Ghasts, Ghouls)
These undead are powered by a single strong emotion. For ghasts and ghouls, that emotion is hunger. They exist to feed and consume living flesh (and the soul energy spilling from it). For ghosts, the emotion is usually anger, sadness, loneliness, or some other negative emotion like that. Very occasionally, ghosts possessed of positive emotions like love or gratitude occur. These are not the original soul, but retain more of the memories associated with the original person. They are an imprint, an echo of an event, trapped in a loop. Breaking the loop dissipates the ghost.
The Noble Dead (wraiths, wights, vampires, liches, death knights, revenants, etc)
These occur when a soul is stuffed back into the body it came from and the body is reanimated with necromantic energy (except the wraiths and wights which are the pure soul itself). These beings live off of stolen Aether. They possess strange and terrible powers as well as most of the memories and identity of the person they once were. The positive traits and emotions tend to fade under the influx of stolen life until all that remains is the hunger or the duty. A very few are bound to higher things and are animated by the power of their oaths.