The Fallen are a dying race of space pirates in present. Their society is plagued by backstabbing, hierarchy, starvation, etc. The biggest and strongest Fallen take up a majority of their sustenance, and leave little for the others, and they still starve themselves. Lesser fallen have their arms amputated to cement their lowly nature. Clearly the weakest of the factions that could not hope to compare to the blessed might of the Guardians, or the dark magics and Gods of the Hive, or the reality infecting science of the Vex, or even the sheer military power of the Imperium of Cabal. They survive for scrounging for supplies and the meager reserves of their precious Ether, which Fallen physiology is dependent on for survival.
Now, this would be bad on its own. But the thing is, to the Fallen it is far worse than just that. You see, they used to have the same blessings of the Traveler now possessed by Humanity, and you can see just how powerful that made us. They were better than us in fact, with Fallen biology being superior to regular humans, more advanced technology, far more unity than humanity could ever hope to achieve, the strongest of the Fallen could have been be considered outright gods, just as the strongest Guardians can. So what changed? Simple. The Darkness showed up, and the Traveler abandoned the Fallen like it had abandoned so many species prior. Without their blessings, the Darkness made short work of their species and they only even still exist in their tortured state as what amounts to an open threat to Humanity by the Darkness. Their pathetic existence is allowed to continue because that's basically the Darkness's way of saying "I've met with species that had the same blessings of the same God as you guys. Look how they're doing now". In fact, the only reason that this didn't happen to Humanity was because Rasputin, an ancient human built Warmind, figured out what was going to happen and crippled the Traveller to force it to put faith in Humanity as its last resort. Yeah, we're only around because one of our forgotten superweapons crippled God. Imagine being a Fallen, having your God bail on you, being allowed to survive as a shell of your former glory only as a taunt to another species, and to watch them flourish and develop with the might you just had. Wouldn't it make you seethe with rage? Well, a bunch of other things humans do to the Fallen would too.
The Fallen are not only under attack by the races they steal from to survive, but also directly by Humanity. You see, Humanity knows of the Fallen's potential to uplift themselves, to rise up once again. And it terrifies us. As such, we run operations to cripple their Ether supply, (which means that the PC literally starves children but muh protagonist centered morality), kill their leaders, and outright commit genocide to stop their ascent. Three times there have been major Fallen ascencions, and all three times they are ruthlessly culled by The Guardian. The first instance was with Skolas, an ambitious Fallen who aimed to unify his race, become the Kell of Kells, and lead the Fallen into a new prosperous age where no longer do they have to starve, no longer do they have to wallow in the refuse and shadows of others. Skolas is a boss. The man broke into the Vault of Glass (a location where a Vex can decide you aren't real on a whim and from that you'd get retroactively EE'd) and stole tech from the Vex, even briefly usurping their power over their own space. That is literally a perfect example of that Fallen pragmaticism and cunningness that allows them to survive even while crippled. Skolas was bringing the other Kells under his banner too, and most of them did so voluntarily. So obviously this is an issue for humanity, the Fallen getting uppity again. We chase him around the solar system, he gets sent to the Prison of Elders, an absolute hellhole, to say the least, then you break into the Prison of Elders to murder him. Damn, that's cold. You get the excuse that Skolas is a butcher or war criminal or some shit, but even if that's true Humanity shouldn't really be one to judge, what with their genocidal crusades against this race. Who can really blame Skolas for brutality against those that oppress his people, that would rather see them all starve slowly than cede any amount of power? By what right should the Guardians claim the moral high ground here? What doesn't help is that Skolas, as the prophesized Kell of Kells, is essentially a messianic figure. He easily unites his people, and even while crippled is enough of a threat that he and his skills in this area are comparable to a Hive God. Skolas was celebrated even in the Fallen culture of backstabbing and not wanting to give up any power, and due to being too dangerous in this regard he was hunted down and killed by the very people the traveler abandoned the Fallen for. The second example of this is when the Fallen discovered SIVA, some ancient human technology that theoretically can do just about anything. Some fallen integrate it into their biology and amazingly, it works. One basically becomes a machine God, and even basic SIVA fallen are beyond the need for Ether. Think about the implications like that. Maybe with some guidance a resolution could be reached between the Fallen and Humanity, as the Fallen no longer need to raid Human resources to live. Obviously there's going to be hostility and tension, but maybe an alliance against the much greater foe could be procured. At the very least, the Fallen wouldn't be a species facing starvation and extinction any more. They could be free of their limits. But of course powerful Fallen is too dangerous to humanity so lets commit more genocide. And so we do. While SIVA on its own is horrifically dangerous, it's not absolutely uncontrollable. Rasputin manipulates it with ease (though after all that's happened, he's more nominally on the side of humanity than anything else), and Banshee-44 and Shiro-4 figured out how to greatly enhance weapons using it. SIVA wasn't designed to be a machine plague, it was designed to do whatever the programmer does. But alas, it was not meant to be. The third example is of the Forsaken, who are essentially zombie Fallen banded together behind Awoken Prince Uldren Sov. The Forsaken have entirely transcended traditional death itself, with one of the Barons even becoming a Hive God by force. The Forsaken don't need ether either, and as a society are beyond the trappings of backstabbing and hierarchy that plagued the Fallen so. However, the Forsaken, being allied with Uldren, killed Hunter Vanguard Cayde-6, so of course the PC goes on a revenge quest against them, wiping out their leadership and huge swaths of their numbers. To make matters worse, Uldren was only manipulating them for his own benefit. Uldren was being manipulated by Riven, who was being manipulated by Savathun, Oryx's sister. The Forsaken aspirations of greatness were ultimately for naught, as they all were just pawns to a far higher power. Everyone in the Forsaken DLC was basically strung along by Savathun the whole time, and nobody even knew until it was far too late. The worst part about this is that from a human perspective, this is easily justified seriously by the reasons that I kinda mocked above. A unified Fallen are simply far too dangerous and hold far too much hatred for us to be allowed to exist. It's less a matter of morality and more a matter of survival on the part of both species, which is sad. There is some hope though, with one particular Fallen captain who the Guardian canonically spares later being integrated into the City and eventually becoming a Guardian himself, hinting at a possible Fallen alliance, but I wouldn't hold my breath.
TL
R, The Fallen used to be Humanity+, now get genocided by Humanity while we basically flex their own stuff on them and watch over them to make sure they don't stop starving.
Edit: Oh yeah, as an added bonus. Their Ether is actually synthetic Light. You know, the same Light that makes Humanity so strong and once made the Fallen so strong. Their biology was altered in a way that they become dependent on the Light, and they would flat out die without it. This cheap substitute is the best they can get, and we still go and sabotage it. This has some implications about Humanity and our possible developing dependence.
