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The planet on which the events of Final Fantasy VII take place is portrayed as a living entity. It is conscious and has a soul which takes the physical form of the Lifestream. All living things on the planet come from the Lifestream and when they pass away they return to it and become part of the planet again. All of their emotions, knowledge and what is left of their being form the Lifestream.
It is implied that without the Lifestream, life cannot exist on the planet. In other words, the planet itself will die if something harms its Lifestream.
By using Mako Reactors, Shinra extracts and transforms the Lifestream into Mako energy. This energy is what powers Shinra's industry, and without it, they are unable to get the supply of power necessary for their machinery to function.
Materiaare a condensed form of Mako. They are used to perform magic, summons and other abilities. Shinra can make artificial materia in their laboratories, but there are natural materia made by the planet.
SOLDIER members are infused with Mako energy to enhance their abilities. People respond differently to Mako which makes some stronger than others. All SOLDIER members can be identified by the color of their eyes which changes as a result of being exposed to Mako. Mako can be toxic if one is exposed to large amounts of it.
AVALANCHE is an anti-Shinra group that believes that Shinra's use of the Lifestream as a supply for Mako energy is killing the planet. They struggle to stop this by destroying Shinra's Mako Reactors.
Aeris is a descendant of an ancient advanced civilization called the Cetra. The Cetra have the ability to communicate with the Lifestream and speak to the planet. When Aeris was killed by Sephiroth, her spirit didn't disintegrate but kept on living in the Lifestream. Cloud and other characters have several visions in which they can feel her prescence or hear her talking. She has a certain degree of control over the Lifestream which helps her guide it to aid Holy in its struggle to prevent Meteor from destroying the planet.