They are a arachnid-like race, locked in a seemingly eternal war with the Ophidians, a snake-like race.
They appear to be native to the Lost Lands, but spawn in several other places as well. (Ilshenar for example.) They also appear to be based out of Terathan Keep Underground, a dungeon in the Lost Lands.
The Terathans appear to be on the losing end of the war. Their Keep is crumbling and surrounded by Ophidians on all sides. However, their snake-like enemies can't quite ever seem to vanquish them completely.
Ricardo the Thief, when escaping from imprisonment by the Terathans, stole sacred objects from the Ophidians during the escape, thus setting off brutal Ophidian attacks on Britannia.