The Spellplague is a malady that struck Realmspace on 29th Tarsakh, 1385 DR and was caused by Mystra's assassination at the hands of Cyric and Shar. With the goddess's death, the Weave, the universal structure of arcane forces, convulsed. It continued for a decade, leading to the Wailing Years, during which time arcane magic ceased to function and the planet of Toril was transformed.
For eons, magic had been bound within Mystra's Weave, which contained and controlled how magic worked. Her death tore the Weave, and the unleashed magic exploded, creating the cataclysm now known as the Spellplague.
Other scholars argue that this cannot be the case, because Mystra has been slain before only to be reborn, and the Weave maintained its hold over the power of magic for the duration of her death. The truth will likely never be fully known to mortals, if it is even known to the gods.
The most obvious effects were the floating earthmotes that hovered in the sky and the occasionally Spellplague pockets that continue to burn with blue fire. But the changes were deeper than that. Many spells were more difficult to access, and now required elaborate rituals. Others became so easy that wizards could cast them at will.
The entire foundation of magic had been altered, and mages now had to re-learn all they knew.
Neverember knew the city would never thrive again so long as people feared the Spellplague. So he took drastic action, ordering the exile of any Spellscarred from Neverwinter on pain of death. Often referred to as "The Protector's Law", this harsh measure was unpopular with many, and rebel movements still point to the pain and suffering it caused as sources of their revolt.
After 10 years under the Protector's Law, the Spellplague has nearly been eliminated within Neverwinter. To combat the unrest generated by the Protector's Law, Lord Neverember now funds research into cures for the Spellplague, and pays for the treatment of the plague's Spellscarred survivors at the Sanatorium of Helm's Hold. Furthermore, Spellscarred soldiers are given the option to volunteer at the defenses of Scar Keep, protecting the city from further incursions from the Chasm.
The Protector's Law is still controversial, and though it's mostly accepted, many in Neverwinter have been affected by it to some degree. Further, it is whispered that in the lawless areas outside the Protector's Enclave there are hidden places where desperate victims of the Plague hide, hoping for a miraculous cure.