There are five main factions: The Empire, D'Shar Principalities, Sarleon, Fierdsvain, Ravenstern or your own. There are also minor factions and knighthood orders. You can become a member of any of these orders and establish any of them including even your own fully customizable one in your town or castle. In this mod you can actually win, terms of your victory are listed in the in-game manual. This mod has a very detailed and interesting backstory which could be found in the manual in the game folder.
All of minor factions are non-joinable, but you still have relations with them. From time to time they spawn a great army that you need to eliminate to win the game. It does not affect the Noldor armies because you need to be a Noldor's friend if you want to win the game. These armies led by Noldor lords can become a very good help to you if you have positive relations with Noldors. More than that, the Noldors have a hidden castle which could be found only after completing the quest named 'Befriending Noldors'. It is possible to siege it but it's also almost impossible and as a result the castle will just disappear leaving some Noldor loot for you.
The Noldor was originally a group of Elves inspired by J.R.R Tolkien and shown a minor appearance at Peter Jackson's movie, the Fellowship of the Ring. Their appearance in Prophesy of Pendor can actually be explained and found on the forums by the mod creator Saxondragon.