Gensokyo: The Land of Fantasy where that which passes into myth inevitably ends up. The lands that would form Gensokyo were barren and desolate, filled with youkai who constantly terrorized nearby areas forcing heroic humans to exorcise and exterminate as many as possible. Gensokyo itself was created in 1885 CE by the Hakurei shrine maidens, sealing the youkai-filled lands off from the increasingly scientific and skeptical world with the great Hakurei Border.
Modern Gensokyo is significantly less violent than it's past would have one believe. A modest population of humans lives in a village in the southern plains of Gensokyo, a decent sized group of rabbits live in the Bamboo Forest of the Lost, and the rest of the land is populated by youkai of all types, with a high concentration of tengu and kappa on and around Youkai Mountain.
In the past, the Hakurei Shrine Maidens along with powerful Youkai representatives Yuuka Kazami and Yukari Yakumo created the single law of the land all within must follow: That of conflict resolution by Spell Card Dueling. Duels are nonlethal, meant to show beauty and finesse more than raw power to give humans a level playing field against powerful youkai. While one may name the stakes of a duel, lethal force is never allowed, nor is claiming the opponents life as a prize for victory.
As a result, humans and youkai began to live in peace, the occasional disputes and incidents are settled quickly and relatively peacefully. Indeed, the human village has many youkai who visit to make use of the shops, and some even live within the village's bounds. It has truly become a paradise for those who live inside of it.