Our ancestors -- who were part of a secret militia -- sealed themselves and their families down here for protection. For generations, down here we've remained, safely hidden within the womb of Mother Earth."”— Vegeir.
The Slags, led by Vegeir, are heavily mutated people from the Ghost Farm on the outskirts of Modoc. They are the descendants of a militia group that, when the Great War came, sealed themselves and their families underground for protection. This event came to be known to them as "the Sealing". Since this sealing, the Slags have mutated. Few can bear to be on the surface because they are not used to having a black sea of nothingness above them. They also cannot stand the bright light of the sun, as living underground for so long has devolved their eyes to a form of permanent tunnel vision.
The Slag population steadily increased since the Sealing. It soon became apparent that they could no longer survive underground without further supplies. So the Seal was broken, and they once again looked to the surface for survival, creating a small farm some years prior to 2241, which to the people of Modoc looked as if the farm appeared out of nowhere.
A group of Modoc's inhabitants were out hunting when they noticed the new farm. Soon after, some of them got together to visit their new neighbor, but they didn't find anyone there. After many months of trying to contact the owners with no success, it was decided that the farm must have been abandoned soon after it was built. So instead of letting the crops rot in the fields, young Karl moved in.
To get rid of the intruder, the Slags, who were not a violent people by nature, came up with the ghost idea, smearing themselves with glowing fungus. After some time, Karl started to tell stories of seeing strange glowing figures tending the crops and feeding the animals at night. The other people of Modoc all laughed at him, thinking he was making up stories. Then one day Karl stopped coming into town.
When the people of Modoc came looking for him, they found bodies, some crucified, while others were left to rot out in the sun. In reality, the bodies were merely props the Slags manufactured to scare off those who try to steal from them, mostly brahmin guts and dummies. While the inhabitants of Modoc believed Karl to be dead, he had only escaped to the Den.
Unfortunately, this has been a little too effective. Around 2241, the Slags were seeking to make contact with the surfacers, but no one came to the farm anymore for fear of the ghosts. The player can help the slags to contact Modoc. However, when delivering the Slag message to Jo, the player sets a sort of timer, since Jo warns him/her that he/she has to find out what happened to Karl within 31 days. If the player cannot manage to do so, Modoc's inhabitants will exterminate all the people in the Ghost Farm, including children.
The Ghost Farm and the Slags appear only in Fallout 2. It is unknown whether the Chosen One helped establish good relations between Modoc and the Slags, the people of Modoc continued to consider the place haunted or simply wiped out the Slags in what they considered revenge for Karl's supposed death, since nothing on the matter is mentioned by the narrator in the endgame cutscene.