But then a crisis over the region of Orre heated up. Neither would give in, and it was resolved not by diplomacy, but by global thermonuclear war. The Elite Four were wiped out. Team Rocket exploited anger at the Elite Four who started the war and fought the non-Rocket Gym Leaders, who had claimed control as the successors to the pokemon league.
After Giovanni's death in battle from Erika's arrow, the Rockets lost their cohesiveness as an organization. Many Rocket cells continue to control areas of the pokemon world, but as warlords, not a unit, and other Rockets have returned to organized crime. The Gym Leaders have barricaded themselves in their gyms in ruined cities, hated by the people who once enthusiastically challenged them for badges. People blame them less than they once did now, because it's become increasingly likely that the Elite 4 and not the local leaders were truly to blame. Some brave trainers challenge them to old-style battles, others barge in and try to kill them and take their gyms. So far, all of them save for Giovanni have survived.
Today, Kanto is in ruins. Its cities are devastated where not annihilated. Radiation has caused existing pokemon to mutate into strange and terrifying new forms, such as Zubat with eyes and Machamp with an extra pair of arms. Even the legendaries have not been immune: Mew, the original Mew, has turned into a pokemon bearing a strange resemblance to the Mewtwo of Team Rocket's experiments. Three of every four people and pokemon have died already from the blasts, and the survivors face nuclear winter, famine, and a collapse of global trade.
And then there are the natural disasters. Blizzards and hurricanes and volcanic eruptions. Thunderstorms which last for days, storms which seem that Zapdos itself is aiming the lightning to kill as many people as possible. And although people can't travel easily, for the roads are divided into the domains of warlords and the skies too thick with soot for the sort of flying which once ferried trainers across the cities, the wrath of the gods knows no bounds: there have been earthquakes and tsunamis and even temporal warps in Kanto.
In response to this chaos, religious groups have sprung up which preach of Arceus' wrath and the need to calm the legendaries. Most are led by charlatans and their devotion serves only to give money and power to their leaders. A few are led by dangerous fanatics. The only one who has done anything to calm the legends was the great hero in Sinnoh who walked into Stark Mountain as it erupted and captured Heatran; his bravery has inspired many copycats, all of whom have died fighting.
It is an age littered with warlords and priest-soldiers and company towns and peasant republics, where every city fancies itself a free nation. It is an anarchy where power is there for those who seek to claim it. The Warring States' Era has begun anew.
You are a survivor. You have made it through the first five years of the worst era in human history. Maybe you were a skilled trainer even in the old days, or maybe your pokemon have grown strong and evolved from the struggle to survive. Or maybe they haven't, and you're just a kid starting on your journey with a level five Bulbasaur, trying to keep the dream of the old days alive.
Food and drinkable water are precious resources, and not everyone gets enough – but you're probably a good enough trainer not to worry about that. Pokemon Centers are strategic locations, and most people either wait for their pokemon to heal or pay traveling healers. (In coins only, mind you. Paper money is worthless now, but luckily pyen were still made out of precious metals.) Pokemon battles are 4-on-4 or 100-on-100, not 1-on-1 or 2-on-2, and trainers are a valid target. When you lose, expect your money to go with it – maybe you'll even be kidnapped.
With a few rumored exceptions, people don't battle for fun anymore: Pokemon are too important for that.
It's one hell of a time to be a pokemon trainer.