Imagine a large island, roughly the size of Australia. The sea around is is effectively endless: no-one from the island has found an edge to it, or any other land masses. This is a fantasy land, and the technology is roughly equivalent to dark ages Europe. So news travels relatively slowly.
There are a wide variety of different races and cultures on the island. All of them share a common motif, however, because it happens to be true: the island is still being shaped by the gods.
Let's take a practical example. A fisherman takes his usual route around the local coastline. After a few miles of everyday sailing, he comes across a surprise. What was once sea was is now several square miles of land.
If there are intelligent creatures on this land they will either believe they have always been there or that they and the local landmass have been uprooted from somewhere else and placed on the coast of the island. They will have memories of their lives and cultural traditions going back into the mists of time. These beliefs and memories are a lie. The reality is they were shaped by the gods and placed down in a moment.
These creation events happen perhaps once every couple of years. Each time, a few square miles is added to the island. It is normally on the coast, but not always: sometimes large caverns appear underground, or a previously impassable mountain range acquires a new, accessible valley. They always occur at uninhabited sites when no-one is around. The people in these new areas may belong to a race or culture already extant or they may be entirely new on both counts.
My question is: how are the various peoples of this island going to come to terms with the fact that none of them can be certain of their heritage? The fisherman is going to find a land which he is certain is entirely new (which it is), but the people of the land will firmly believe they've been there forever. So our fisherman will realize he can't be certain that his life history is real or whether he was created from nothing a year or two ago.
People who live in the ancient city on the center of the island don't know if it really is an ancient city, and that the history books in their library were written by their ancestors or made up by an imaginative god. The only thing that everyone knows for certain is that the gods began the act of creation and that they're still creating.
How will this affect people's cultural beliefs and practices? How will the existing inhabitants of the island relate to the sudden appearances of new cultures?