Originally Posted by
Wolf Kanno
I can't comment on WoFF, but in the case of Dissidia, the two gods of the world, Cosmos and Chaos pulled the heroes from their respective worlds to fight on their behalf, but when characters die, they lose their memories, and thus over the course of the cycles, many of the heroes don't really remember or reference their original worlds. It's heavily implied the villains are far more aware of what's going on since they keep winning the cycles. One villain is trying to end the cycle so they can all go home, two of them are trying to manipulate the cycle for their own good, the rest are so apathetic by the point the story starts that they really don't care anymore hough two in particular are suffering from the memory drain issue and were formerly trying to end the cycle as well, and then there is Kefka who is just screwing with everyone for the lulz.
Course this is the base story explanation, it gets a little harder to follow when you start putting into account the Secret Reports that imply the game takes place in an alternate universe version of the FFI world and tries to give a real origin story to WoL, Garland, Chaos, and Shinryuu. It gets really confusing at times and most fans just kind of ignore it.