Souls and Their Composites

In Elder Scrolls, souls are made up of two parts: AE and Animus. 

The Animus is the life-giving spark of magicka. It is the part of the soul that gets trapped in soul gems and is used to infuse and recharge enchantments. If used in such a way, it gets depleted over time, but is slowly recharged by the magicka travelling through sun- or starlight.
The memory and personality accumulated over a lifetime is called the AE.   

When Animus and AE are disunited, the AE slowly dissolves. This naturally happens upon death. The Animus returns to the Dreamsleeve and is cleansed of the AE, which dissolves while dreaming its afterlife.

This is a particular mechanic of mortal souls only. Daedra do not have an AE, their Animus contains memory and personality as well as the magicka spark that keeps them embodied. When killed, their Animus returns to Oblivion and is replenished there until enough magicka has accumulated to allow for a reformation of their body.  

Who knows this: Enchanters use Daedric or animal souls and do not know about mortal soul composite, while competent Necromancers should know this. Conjurers and Sorcerers should know about Daedric souls.

Examples:

• The Path of Incarnate, in which the PC encounters ghosts of failed Incarnates. These are Daedrically preserved AE, which once partnered with the Animus that is currently part of the player. The Nu-mantia Intercept makes it clear that the Nerevarine is an actual reincarnation.
• In Ghost in a Gem a badly enchanted soul gem houses both AE and Animus of a Mages Guild member. If used to enchant an item, the AE eventually dissolves and the item bears a normal enchantment.

Soul Gems and Their Colors

Civilized people observing the proper rituals are protected in soul by Arkay’s Blessing and in body by Arkay’s Law. It is very difficult for Necromancers to take unconsenting souls and nearly impossible to turn properly buried bodies into servants.

It is absolutely possible for a knowledgeable and powerful necromancer to overpower Arkay’s Blessing, but it cannot be done quick and easy in the kind of battlefield conditions players find themselves in.

As a direct response to Arkay’s Blessing, black soul gems were invented by the newly ascended King of Worms in the years after Daggerfall. The god-moon of Mannimarco circles the god-planet Arkay and, when it hides Nirn from Arkay’s sight, Necromancers from the Cult of Worms can enchant normal soul gems into black soul gems.

Use of these completely nullifies Arkay’s Blessing and allows for the capture of a protected soul to be as easy as the capture of an animal or Daedroth.

Who knows this: Priests of Aedric faiths, competent Priests of other faiths, and competent Necromancers know about Arkay’s Law and Blessing. Only a few Necromancers of the Order of the Worm know about black soul gems, with their creation barely having started.

Examples:

• In ESA: Redguard, Rescue Iszara, the Sload Necromancer N’Gasta created a massive soulsnare, but could only capture unprotected souls.
• Arkay the Enemy, written by the King of Worms lays out the details of Arkay’s Blessing and Arkay’s Law.
• TES IV: Oblivion’s Necromancer’s Moon has the player observe a ritual that creates a black soul gem.

The Undead and the Daedra

The AE on its own dissolves without the Animus’ magicka, but other sources of magicka can be supplemented.

Necromancy, both sorcerous, philosophical, and sacred, can supply the Necromancer’s magicka with that of the Animus, thereby summoning a ghost, spectre, or similar creatures. 

Permanent enchantments can bind bodiless undead semi-permanently or create fleshbound ghosts, such as Dunmer Bonewalkers or western Zombies.

Sometimes, this happens on its own when the AE lingers due to unresolved issues or enchantments preventing it from travelling on. These hauntings can be countered by Exorcists and Priests, never mind Necromancers.

Another mechanic by which AE can exist without an Animus is Daedrically preserved AE. 

This might be done for several reasons, but chief among them is amusement: Daedric Princes are enamored with the surprises and follies of mortals and some look to take their AE out of Mundus’ reincarnation cycle, at least until the mortal grows boring. Clavicus Vile, in particular, seems to be very fond of owning mortal souls.

Who knows this: Competent Priests, Sorcerers, Shamans, Enchanters, and the like, should know the general working of ghosts to some degree. 

Examples:

• Ancestors and the Dunmer explains ghosts and souls from a Dunmer perspective.
• Loveletter From the Fifth Era explains the Daedric interest in AE. The Monomyth does the same, in a more simplistic manner.
• The Path of Incarnate, in which the PC encounters ghosts of failed Incarnates. These are Daedrically preserved AE, which once partnered with the Animus that is currently part of the player. The Nu-mantia Intercept makes it clear that the Nerevarine is an actual reincarnation.

The Dual Uses of the Dreamsleeve

The Dreamsleeve is a coexisting concept or place where the AE, once it has been disunited from the Animus, resides and dreams its afterlife while being subsumed. Communication with ancestors, ghost summonings, and similar procedures all interact with the dreaming AE.

This medium in which the AE resides can also be used to communicate telepathically. The Elder Council regularly communicates via Memospores, which are memetically encrypted thought-messages sent in packages to intended recipients.

Telvanni Mage-Lords communicate with their Mouths in a similar manner.

Dagoth Ur sends his Dreams through the Dreamsleeve as well, as his AE is awake where all others are asleep.

Who knows this: The existence of the Dreamsleeve itself is extremely obscure and limited. It is essentially bit, not byte, knowledge about how the mechanics of Mundus work.

Imperial Curia clerks know it as an occasionally haunted messenger system. Telvanni Masters would, if pressed, describe it as “beyond the waiting gate” or “sent through the spirit world”.

Probably the only people who know and understand it completely are the Psijic Order, individuals among the uppermost Altmer castes (the Symbologicians, who had knowledge on par with the Psijic, got erased), individual Telvanni Mage-Lords, high-level Imperial operators (on or deeply involved with the Elder Council), Moth monks, Temple Zero heretics, some of the Sixth House, and Necromancers who actually pay attention to what they are doing.

Examples:

• The Nu-mantia Intercept shows a series of memospore transmissions.
• In the ESA: Battlespire stage Shade Perious, a Nocturnal drove her spirit into the Dreamsleeve and was bound there by an enchantment.