Long, long ago, the Human race disappeared entirely from existence, for obscure and forgotten reasons. Only a few managed to survive, fleeing into the oceans and beginning a new life amid the waves.
Over the passing of aeons, their descendants fully adjusted themselves to their marine habitat, evolving into a slightly different (but totally Human-like) new race, the Mermen.
Only recently the Merman race has begun the re-colonization of the coastlands, but although the game story takes place in a typical Merman town on a little island, one of the locals, Eiji (the young protagonist), is not Merman at all but a true member of the supposedly extinct Human race...

[Adapted from a forum post by Baldo]