The Miao people featured in the game are a real nation, one of the 56 officially recognized ethnic minorities of People's Republic of China (there are also Miao people in Vietnam and Laos). They speak their own language (some linguists consider it unrelated to Chinese) and have their own culture and traditions. Also, the distinction between White and Black Miao really exists and is not an invention of the game. However, portraying Black Miao as usurpers and generally "bad guys" is part of the game's fictional storyline.
Xianjian Qixia Zhuan can be roughly translated as "The Legend of Magic Sword and Wonderful Heroes".
"Xianjian Qixia Zhuan" is widely recognized as the most popular Chinese game ever made. A Chinese TV series "Chinese Paladin" is based on the game and follows its plot. According to a recent (summer 2005) survey in PR China, "Xianjian Qixia Zhuan" sold more copies than any other software in China, including Windows '98! Of course, one must bear in mind that most Chinese use pirated versions of Windows '98...