The gods were all once men a long, long time ago. Men and women who became so accomplished at the now lost art of fleshforming that they were able to create for themselves new, perfect bodies. Bodies that could not be damaged, would never age or die, truly immortal. As time passed and these individuals continued to not age and grow stronger their influence became all the greater. Some humans began to worship on their own, others assumed the identity of pre-created pagan dieties.
As their power and influence grew, different groups came more and more into conflict and the world was half torn apart by the fighting between these powerful beings. Finally they met and settled on an accord of peace and non-interference. Creating for themselves their own pocket dimension in which to retreat peacefully into, a realm called Asgard, Olympus or any one of a number of other names. From there they continued to have some limited interaction with the human world, often venturing into it in disguise or taking it upon themselves to help certain favored individuals but mostly remained aloof and apart from it. Masters of fleshforming they have filled their world with various amazing and dreadful creatures, as well as semi-human servants and vassals.
Sometimes a god will sleep with a human while visiting the human world, at times they do this while in the visage of another, such as the human's lover, at other times they do not. The reasons can be as varied as falling in love with a human to a simple lark. The chance of a god impregnating or being impregnated by a human is low, about one tenth of the chance of a human with a human but can happen. These offspring and their decendants are called demigods.