|The trippy UK paperback cover.|
The Law-Chaos war in Three Hearts is straightforward, but the main matter in this novel is a war between two powers of Chaos, the elves and the trolls. The conflict is tragic rather than heroic, because its Pyrrhic outcome heralds the weakening and fading of the hosts of Chaos. Our lawful world, as in Tolkien's and Moorcock's fantasies, must somehow be arrived at from these narratives set in a dim and unknown past.
Although cruel and evil, the fey races and their mortal allies cannot help but be read as the antiheroes of the story. Law is also more complicated; although Christian belief and oath protect against Chaos, the "White Christ" is far offstage, compared to the Lawful Norse gods - in particular, Odin - who are shown taking a more active hand to set Chaos against Chaos. This situation has parallels to the further complications of alignment in AD&D. Strife can happen within the camp of Evil (Chaos) as well as Good (Law).
Now, about those elves. Anderson's elves, trolls, dwarfs and other fey creatures inhabit a parallel world. They are normally invisible except to those humans who have been granted "witch-sight" through sorcery. However, their deeds sometimes manifest as omens, portents and misfortune for humans.
(As an aside, this would be a great campaign rationale. Ever wonder why the king with his retinue of knights can't go after those goblins threatening the village? They need the adventurers, witch-sighted all, to actually see the goblins.)
Fey creatures also cannot handle iron and are harmed by it. This means that a fostered human or changeling, as well as the dwarfs who are not iron-shy, become valuable tools in the elf-troll war. We catch a glimpse of this in the OD&D and Holmes D&D logic of elves choosing to be fighters or magic-users each day. Holmes apparently elaborated on the reason for this in a novel. Simply enough, the choice to wear iron armor and weapons would nullify the elf's magic. But although games like Runequest took the idea and ran even further with it, AD&D dropped it cold.
If people complain that elves are overpowered in AD&D and later editions, perhaps one reason is that Gygax chose to go with the Tolkien view of elves as benevolent, superhuman beings. What would have happened instead if he'd taken up the Anderson view of elves as powerful and innately magical, but limited by weakness to the inexorable forces of Law and metallurgy? We'd have perhaps a darker D&D, one with the kind of fey elves that other new-old-school settings have embraced (here, here and here as notable instances.)