The region was once a part of the Crystal Sea (or at the coast of it) and is currently a part of the Crystal Desert. It, like the Crystal Desert, was created by the battle between Abaddon and the other five gods. The sulfur was created when the gods struck Abaddon down at the Mouth of Torment.
The people survived there prior to the Exodus, and after on areas where the Sulfur is not at. It is because of the sulfur that it is such a deadly place. The places were created to overlook the Mouth of Torment, and the encreeping Torment that came from there (until recently, it was very very slow and only seemed to be at the Mouth of Torment until Varesh stepped in).
Sahlahja was one of the first places attacked by Joko, and pretty much everyone who was alive in the Desolation after the Exodus was killed off by Joko and turned into his army.
There is more, but this is a basic part of it.
Surprised it's not on the Desolation page of the official wiki, well not too surprised. You have to look around for information with lore.