The area known as the Ruins of Silvermoon makes up the western half of Silvermoon City, the capital city of the Sin'dorei and the former Kingdom of Quel'Thalas. It is split from the reconstructed eastern districts of Silvermoon City by the Dead Scar - the path taken by Arthas Menethil and the Scourge on their way to the Sunwell to resurrect the dead necromancer Kel'Thuzad. As they marched across Quel'Thalas at the bidding of the Dreadlord Tichondrius, Arthas and his warriors corrupted everything in their path. The Scourge smashed through the Elfgates defending Silvermoon from attackers and decimated the Farstriders, led by Sylvanas Windrunner, before finally reaching the Sunwell Plateau and placing Kel'Thuzad's rotting corpse into the magical waters of the Sunwell. Kel'Thuzad was resurrected as a powerful lich, whilst the well was forever corrupted.
Due to the large presence of house-like buildings, this may once have been the residential district of Silvermoon City before the coming of the Scourge. It would explain the large population of Wretched that haunt the ruined lanes as well as those blood elves wandering the streets of the blood elven capital, such as Rarthein.