Hylia

Hylia, also known as Her Grace and later Zelda, is a goddess featured in Skyward Sword. Although she began as a divine entity, she was later, by her own choice, reborn into a mortal form as the first incarnation of Zelda, making her the true ancestor to the Royal Family of Hyrule and explaining the magical powers passed down within their bloodline.

The Battle Against Demise
When the gods of old departed from the world, they trusted their ultimate power, the Triforce in the hands of Her Grace to protect it. However, Demise, wanting to make the world his own, gathered an army of monsters and together launched an attack against the people of the surface, murdering them and causing misfortunes all just to get their hands in the power guarded by Hylia.

To prevent the great power from falling into the hands of Demise, Her Grace gathered the surviving humans on a piece of land and sent it to the heavens, beyond the clouds and out of reach from the evil plaguing the land. Now that the humans were safe, the goddess and the five tribes who lived in the surface joined forces and sealed away Demise, restoring peace to the land. However, Hylia, during the long and fierce battle, had suffered "grave injuries" and knew that the seal would not hold against Demise's immense power.

Since Hylia knew that if Demise freed himself it would bring the destruction of the land, she came up with two plans to put an end to the demon king. Her first plan consisted in creating Fi, the spirit that resides in the Goddess Sword, and giving it the purpose of assisting Hylia's chosen hero throughout his journey. Secondly, Hylia decided to abandon her divine powers and immortal form in order to "transfer her soul to the body of a mortal" so that the Triforce, which was created by gods but ultimately not usable by one, could one day be used.

The Goddess's Chosen Hero
After sending her people skyward, the goddess created a cloud barrier to separate the sky from the world below. She also left several messages for the one who would become her chosen hero so as to guide him from the edge of time in his quest. Along with these messages, the goddess prepared several trials that would test the hero's power, wisdom, and courage. After completing each trial, the chosen hero would receive one of the three sacred gifts left by Hylia, which would help the hero find his way to the purifying Sacred Flames. However, to reach these trials, the goddess also left the Isle of Songs solely for her chosen hero. This isle houses three melodies that would open the way to the three trials, with each of the melodies being bestowed upon the hero to play on the Goddess's Harp.

To secure the Triforce, Hylia hid the sacred relic somewhere in Skyloft, but the location was kept a secret. Before passing from the world, the goddess appointed a dragon to protect each region of the Surface: Faron to watch over the woods, Eldin to watch over the mountains, and Lanayru to watch over the desert. Lastly, she appointed the great spirit Levias as warden of the skies. Each of the guardians were left with a part of the "Song of the Hero", a melody that would unlock the final trial for the chosen hero. Hylia entrusted the guardians to teach the chosen hero their part of the song, since should the hero succeed in conquering the last trial, the path to the Triforce will open to him.

The Goddess Reborn
Hylia was eventually reborn as Zelda, a citizen of Skyloft and close friend of Link. However, Zelda was not aware of her previous existence as the goddess until she was tossed out of the sky and into the surface by Ghirahim's tornado, where an old woman rescued her from being captured by the evil forces and then helped the young girl remember her purpose. With Impa's help, who was actually sent out to help Zelda at the request of the goddess, Zelda set out to pray at the goddess statues located in each temple to purify her body, with each statue stirring up memories of her past life.

At one point, Zelda and Impa travel through the Gate of Time into a distant past, with Impa destroying the gate so as to escape Ghirahim's grasp, who wishes to use Zelda's soul to resurrect his master. Link, the goddess's chosen hero, manages to activate a second Gate of Time and reaches the era where Hylia has just sealed away Demise. There, Link meets with Zelda, who explains her true nature as the mortal reincarnation of the Goddess Hylia. She blesses the Master Sword with the power of the Goddess, causing it to take on its true form, before telling Link that she, as the reincarnation of Hylia, must remain in a deep sleep to keep Demise imprisoned within his seal. Before doing so, Zelda explains that the goddess needed someone with an "unbreakable spirit" to defeat Demise. However, Hylia realized that spirit alone was not enough, and so the goddess, knowing that the young hero would "throw [himself] headfirst into any danger, without even a moment's doubt" if it meant saving Zelda, used Link so that he would be able to wield the Triforce. Her Grace apologizes for the way she had to involve him in all of it, but is prepared to pay the price for her actions. She proceeds to seal herself into a crystal and sleep for thousands of years to ensure Demise's imprisonment holds, and tells Link that he must find and use the Triforce to destroy Demise so that she will be able to wake up in their own time.

Link succeeds in obtaining the Triforce and wishes for the destruction of Demise. He then rushes into the Sealed Temple to witness Zelda's awakening, but just as the group believes that Link's long journey is finally over, however, Ghirahim appears to attack them, taking Zelda and making for the Gate of Time. Link follows Ghirahim, where he is beginning the ritual to revive Demise, who was still sealed in that era, by having him absorb the soul of Zelda. He has his troops assail Link in absurd numbers to keep the hero at bay while he works, but Link manages to reach the center and fights Ghirahim, successfully defeating him. Ghirahim, however, reveals that while the two were fighting, the ritual continued, and the Imprisoned rises, swallowing Zelda's soul and returning to his original form: Demise.

After Link seals Demise within the Master Sword, peace returns to the land, and Zelda as well as the young hero return to their own time. Zelda mentions to Link that she had fantasized about the surface for so long that she wants to remain there and watch over the Triforce, and asks what Link's intentions are for the future. Link smiles at her, and then the camera pans to show both his and Zelda's Loftwings flying back into the sky, implying that Link chose to stay with Zelda and found what would become Hyrule.

Theory
Hylia's primary antagonist, the Demon King Demise, possesses a sword that seems strikingly similar to the Master Sword. It remains unexplained whether the blade wielded by Her Grace and her chosen hero was specifically created to counteract Demise's weapon or vice versa. This is made further unclear by the fact that Fi and Ghirahim are similar humanoid beings accompanying each sword.