According to the Chantry, the Maker created the Golden City for His mortal children to enter when they died. This heaven was destroyed when the magisters of the Imperium set foot inside while still alive, changing it into the Black City and the mages into the first darkspawn.
Now there is no more heaven for souls to pass into after death. Those who worship the Maker are gathered to His side while those who do not must wander endlessly in Oblivion. This is not a form of punishment, but a consequence of human corruption. The Chantry believes that when the Chant of Light is sung from the four corners of the world, He will return, rebuild the city, and make the mortal world a paradise.
The Black City is the one constant geographical feature within the Fade. At any time, a dreamer or mage can look up and see it in the sky, always in the distance. According to the Chantry, only the magisters of the Imperium have ever found a way to enter the city.
“We now have a dog and Alistair is still the dumbest one in the party.” — Morrigan This article contains spoilers for Dragon Age: Origins. Click here to reveal them.
In the Warden's Keep DLC, Avernus' notes mention something relating the Black City to the Taint, "In my dreams I see the Black City, and I am drawn towards it. There is something there, an answer to what the taint is."
“There are men who embrace destiny; these are the ones that change the world forever.” — Flemeth This article contains spoilers for Dragon Age II. Click here to reveal them.
In Legacy, the ramblings of Corypheus, one of the original magisters who entered the Golden City, implied that the city was not golden when they entered and was always black.